Annual Report 2003

Annuol Report
2003
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Mercantile Bank Limited
Contents
MBL Time Line 1
Financial Summary 2
Message from the Founder Chairman
Directors and Sponsors 4-5
The Corporate Structure 6
Management Team 7
Head Office & Branch Network 8
Highlights of l\.4ercanlile Bank Limited 9
Organization Chart 10
'11
Notice of the sth Annual General Meeting
Directors'Beport 12-37
Auditors'Report 38-39
Balance Sheet 40
Otf - Balance Sheet ltems 41
Profit & Loss Account 42
Cash Flow Statement 43
Statement of Changes in Equity 44
Assels and Liability Maturity Analysis 45
Notes to the Financial Statements 46-65
Statement of Fixed Assets 66
Proxy Form
I
I
MBL Time Line
of20th
Fob 26.2004
Dec 24, 2003
ocl21-22,2003
30,2003
July 3,2002
Subscriptlon ior Shares
29,2000
Op€ning of 15lh Branch
20,1999
2
Financial Summary
(Figure in [.4illion)
2002 2003
2003
Tk. US$ TK. US$
Intermediation Ratios lnterest lncome 1281.19 21.86 1588.67 27.18
12
10 86% lnterest Expenses 923.11 15.75 1115.82 19.09
Net lnteresl lncome 358.08 6.11 472.45 8.09
Non-lnterest lncome 311.11 401.05 6.86
Non-lnterest Expenses 207.95 3.55 298.58 5.11
3
3.36q/" Net Non-lnlerest Income 103.'16 102.47 1.75
0 I 0.73yo
Nel
I
lnterest
Non Ast
l,largin Utilzation Ralio
Operating Profit 461.24 7.47 575.32 9.84
Financial Ratios
Net lnterest llarqin 3.16% 3.36%
Nel Non-lnteresl Margin 0.91% o.73/"
Earninq Base in Assels 93.267" 91.59./"
Efficiency Ralios
100 Operating Etficiency Ratio 71.06"/" 71.O90/o
91.59./.
Asset Utilization Ratio 9.71"/" '10.86%
80
71.091"
60
Balances at Year-end
Loans 8896.19 151.81 10775.95 184.36
20 lnveslments 1382.29 2107.26 36.05
Total Assets 16383.17 279.54 18324.73 313.51
Earning Base Deposits 15150.42 254.54 16285.19 278.62
Total Liabilities 15698.61 267.90 17089.50 292.38
Equity 684.56 11.68 1235.23 21.13
Averaqe Balances
lnlerest Earning Assets 11339.63 193.51 14092.03 241.10
lnterest Bearing Liabilities 9916.20 169.22 11836.38 202.so
Advances 7603.11 129.75 9246.61 158.20
a
e
Credit Ouality
Non-Perlorming Loans (NPLs) 37.49 0.64 444.02 7.60
t, NPLs to Total Credit Outstanding 042% 4.12%
f
ti
d
o BIS Capital Adequacy Batio
'lier I 7.04.k 9.58%
0E i Tier ll 1.070/o 0.90%

E
:+ ;ee ae
CapitaJAdequacy Batio 8.11"/" 10.44"/"
Convelsim Bate I US$ 1 .00 = Tk.58.60 for Oeember, 2002 and US$ 1 .oo = Tk. 58.45 for December, 2OO3
3
Message from the Founder Chairman

First lwould like to express my deep appreciation to you - the sponsors,
the customers, the business partners and the employees o, Mercantile
Bank Limited for the enormous supporl, patronage, dedicated service and
good wishes. As Chairman of the Bank, I leel honored and delighted at
this opportunity to present the bank's performance during the year 2003
I
l- and its ,uture prospects.
The year 2003 was a successlul and challenging one for Mercantile Bank.
ln this year Mercantile Bank not only remained as the top performer of the
3rd generation private banks but also surpassed a number ol 2nd
generation private banks in terms ol total deposits, loans and advances
and operaling profit. Performance of the Bank is evident lrom the lollowing
financial ratios:
Net lnterest Margin 3.36%

Operating Efliciency Flatio 71.O9/"
Earning Base in Assets 91.59%
CapitalAdequacy Ratio 10/4%
"Committed to a
performance culture where We are steering a modern commercial bank, tocused on the areas of core
recognition and rewards are business of Consumer Banking, Corporate Banking and lnternational
based on individual merit Trade Finance. Our aim in 2004 is to improve our competilive position in
and demonstrated the markel segments and make steady investment in our core business. I
performance, regardless of am a firm believer in teamwork and feel that a loyal and motivated team
religion, gender and age." can produce excellent results. To do this, we need to demand excellence
of etforts, both of ourselves and our officers in a concerted and
harmonious manner.
We are also committed to a perlormance culture where recognition and

rewards are based on individual merit and demonstrated performance,
regardless o, religion, gender and age.
One ol our greatest assets is the trust ol our customers. To keep their trust
we have to uphold the highest professional and ethical standards amidst
all odds oI competitive environment.
The protessionalism, dedication and loyalty already demonstrated by our

people are the cornerstone of our success. We are energized and
committed to seizing the opportunities that lie ahead and I am confident
that we have the capability to build up an even more robust and profitable
business in days to come.
At the end, I would like to thank once again all of our customers,
shareholders, business partners and our employees for their contribution
to a very successlul year 2003 and look lorward lor even a better future.
Md. Abdul Jalil

4
Directors and Sponsors
Md. Abdul Jalil
Md. Anwarul Haque
t
.Z
Dr. Toulique Rahman

Chowdhury
ASM Feroz,Alam
* Alhaj S. M. ShakilAkhtar
Md. Aman Ullah

Golam Faruk Ahme.l
Md. Abdul Hannan
I
Md. Nasiruddin
Choudhury
A{6
l\4. S. Ahsan
[r!d. Selim
L I
Bilkis Begum
I
S. M. Shafiqul lslam
(NIamun)
Al-hajAkram Hussain
(Humayun)
5
Directors and Sponsors
Md. Tabibul Huq
Jamshed R. Khan
Subrota Narayan Roy
Md. l,rizanur Rahman

Engr. l\4ohd.
Chowdhury
Monsuruzzaman
\
Alhaj Mosharrel Hossain
Alhaj Tara l\reah Khan
S.M. Abdul lvlannan
l\4orshed Alam
Morzina Khan Monzu
Md. Shahabuddin Alam
l,'
I
Jalaluddin Ahmed
Yeamin
A. K. [,4. Shaheed Beza
Nargis Anwar
6
The Corporate Structu re
The organizational structure and corporate Directors & Sponsors

governance of Mercantile Bank Limited Md. Abdul Jalil
strongly reflect its determination to Md. Anwarul Haque

Dr. Toufique Rahman Chowdhury
establish, uphold and gain a stronger
Golam Faruk Ahmed
footing as an organization which is
Al-haj S. Ni. ShakilAkhtar
customer-oriented and transparent in its
Engr. Mohd. Monsuruzzaman
management.
Al-haj Tara Meah Khan
Subrota Narayan Boy
Board of Directors Jamshed R. Khan
The Board of Directors, the apex body of Md. Tabibul Huq
the Bank, formulates policy guidelines, A.S.M. Feroz Alam
provides strategic planning and supervises Md. Aman Ullah
Md. Abdul Hannan
business activities and performance of
Md. Selim
management while lhe Board remains
Md. Nasiruddin Choudhury
accountable to the company and its
Morshed Alam
shareholders. The Board is assisted by the
Md. Shahabuddin Alam
Executive Committee and Audit Committee. S.lvl. Abdul Mannan
Al-haj lvlosharref Hossain
Executive Committee Md. Mizanur Rahman Chowdhury
All routine and day to day operational M.S. Ahsan
matters beyond delegated powers of Bilkis Begum

Al-haj Akram Hussain (Humayun)
management are decided upon by the
S.M. Shafiqul lslam (lvlamun)
Executive Committee, subject to ratification
A.K.M. Shaheed Beza
of the Board of Directors.
Nargis Anwar
Jalaluddin Ahmed Yeamin
Audit Committee Morzina Khan Monzu
The Audit Committee assists the Board in
Iulfilling its auditing responsibilities. The Managing Direcror
Audit Committee maintains etfective liaison M. Taheruddin'
with the Board of Directors, l\y'anagement

Managing Director (Acting)
and the lnternal and External Auditors.
M. Nurul lslam"
Md. Abdul Jalil Company Secretary (Acting)

Chairman, Board of Directors Mir lvld. Hassanul Zahed
Jamshed B. Khan Auditors

Hoda Vasi Chowdhury & Co.
Chairman, Executive Committee
A Qashem & Co.
Md. Anwarul Haque

'TllApril 13, 2004
Chairman. Audit Committee " Acting Managing Director since April 14, 2004
7
Management Team
Chief Advisor
Lutfar Bahman Sarkar
Managing Director
lvl. Taheruddin'
Senior Asstt. Vice Presidents

Managing Director (Acting)
l\i]d. Mahmood Alam Chowdhury
l\y'. Nurul lslam"
lvld. Nurul lslam
Shamim Ahmed
Deputy Managing Director
AKMAtiqurFlahman
A.K.lV]. Shahidu Haque
lvld. Zakir Hossain
Abdus Salam Shaikh
Senior Executive Vice President
l\.4d. Sayeduzzaman Chowdhury
Md. Abul Shahjahan
Abdultah N/d. Zaki Hasan
A lvl lvl Arilul Haque
Executive Vice Presidents
FaisalAhsan Chowdhury
Md. Abdul Jalil Chowdhury
Md. Shafiet Wahed
Prajna Jyoti Barua
Shafiqul lslam Khan
Assistant Vice Presidents
M A Yousuf Khan
Shah Nawaz Siddique
Ahsanul Haq Chowdhury
Senior Vice Presidents
Mohammad Ali
lvlonindra Kumar Nath
Shah Md. Sohel Khurshid
lv1d. Quamrul lslam Chowdhury
lvld. Mahibbul Karim
Choudhury Moshtaq Ahmed
lV1d. Faiz Ahsan
lvlohammad lsmail
l\y'd. Shawkat Jahan Khan
Zulfiquer Shams Chowdhury
l\4uhammad Hajjaj-Bin-Mahfooz
Md. Nazrul Hossain
M. Akhter Hossain
Vice Presidents Kawser Uddin Ahmed

S. Q. Bazlur Rashid A. K. l\il. Minhajul lslam
M. Hamidul Haque Khan Md. Faruque Ahmed
Samarendra Nath Nandi Md. Abul Bashar
Md. Ataur Rahman Mrinal Paul
Md. Rabiul lslam lvld. Khalid Hussain
l\.4d. Habibur Rahman Nild. Abul Hossain
Md. Raliquzzaman A B M Eradul lslam
Ahmedul Haque
Niaz Ahmed Chowdhury
l\,1d. Shoaib Ahmed
Arif l\y'd. Shahedul Haque
Syed Ahmadul Karim
Mir l\ild. Hassanul Zahed
Md. Sadruzzaman
Md. Jamal Uddin
Md. Abdus Salam
K.N.4. Abdur Razzaque
Md. Rafiqul Hoque Bhuiyan
Lutful Haidar Chowdhury
'll lApr 13,2004 [i]d. Shafiqul lslam

'" Acl ns Manaoino D recior s nce Aorl 14. 2004
Farook lqbal
8
Head Office & Branch Network
HEAD OFFICE Board Bazar Branch

61, Dilkusha Commercial Area Plot No.651/652. Board Bazar
Dhaka-'1000, Bangladesh Joydevpur, Gazipur
Tel: 880-2-9559333, 017 1 -679023 Te : 880-2-9804435, 0171-679013
Fax: 880-2-9561213 Fax: 880-2-9810152
Telexr 642509 lVlBLlD BJ
E-mail: mbl @bol-online.com Nayabazar Branch
Website: !\ 2511. Zindabahar 1st Lane
^/w.mblbd.com
Nayabazar, Dhaka-1100
BRANCH NETWORK (20) Tel: 880-2-7390869, 7393827, 0171-836693
Main Branch Fax: 880-2-7390869
61. Dilkusha Commercial Area
Dhaka-1000, Bangladesh Khatungan, Branch
Tel: 880-2-9559333. O17 1 -679023 599, Ramjoy lt ohajan Lane
Fax: 880-2-9554410 Khatunganj, Chittagong
Telex : 6424ao MBL[.4B BJ Teli 880-31 -622751. 63551 4, 01 71 -836692
Faxr 880"31-635514
Dhanmondi Branch
2/1, Cosmos Tower Mohakhali Branch
Road No. 28 (Old), 15 (New) Red Crescent Concord Tower
Dhanmondi FUA, Dhaka-1205 17, lvlohakhali C/A, Ohaka- 1212
Tel: 880-2-9130500, 9142691, O171-679012 Tel: 880-2-9888346, 9891520, 0171-679014
Fax: 880-2-8126768 Faxr 880-2-9895797
Telex: 642529 I4BLDB BJ
Mirpur Blanch
Kawran Bazar Branch Raziha Mansion
99, Kazi Nazrul lslam Avenue 184, Senpara Parbata, Begum Rokeya Sarani
Kawran Bazar C/A, Dhaka-1215 lvlirpuFl0, Dhaka-1216
Tel: 880-2-8'1 12440. 01 71 -67901 1 Tel: 880-2-9008852, 9015661 , 011 -802550
Fax: 880-2-8126882 Fax: 880-2-9014582
Telex: 642438 L4BLKB BJ
Ashulia Branch
Agrabad Branch Jamgora Bazar, Ashulia
Hotal Hawai Building Savar Dhaka
39, Agrabad C/A, Chittagong Mobile: 011 409121. 01/1 222097
Tel: 880-31-71642'1, 723181, 0171-836689
Fax: 880-31-716459 lJttara Branch
Telex: 633134 MBLAG BJ House No. 10A, Road No.7D
Section No. 9, Uttara Nrodel Town
Joypara Branch Uttara. Dhaka-1230
Samabay Super Market Tel: 880-2-8955881 , 8955879, 0174-032728
Joypaa Bazat, Dohar, Dhaka Fax: 880-2-8955881
Tel | 880-6223-87049, 0171-679027
Jubilee Road Branch
Banani Branch Kamal Chamber (2nd Floor)
Awal Centre 61, Jubilee Road
34, Kemal Ataturk Avenue Kotwali, Chittagong
Banani C/A, Dhaka-'1213 Tel: 880-31 -626072, 01 71 -836684
Tel: 880-2-881 6473-4, 0171 -857382
Fax: 880-2-8827807 Elephant Road Branch
Telex: 632123 IVIBLBN BJ 75, Elephant Road
Dhanmondi, Dhaka-1205
Raishahi Branch
Tel: 880-2-86'18732, 9677364, 011-802554
Shaheb Bazar, Rajshahi
Fax: 880-2-9669458
Tel: 880-721 -77 121 4, 01 7'l "836685
Fax. 880-721-771215
Motiiheel Branch
Malek Mansion (Ground Flooo
Naogaon Branch
128, [/otijhee C/A, Ohaka-1000
Chakdev, Naogaon
Tel: 880-741 -53331, 01 71 -836687 Tel: 880-2-71 61 923-4, 017 1 -679029
Fax: 880-741-53330 Faxr BB0-2-7161925
Sylhet Branch Madam Bibir Hat Branch

Laldighirpar, Sylhet Bhatiary Sitakund
Tel: 880-821-723650-1 .0171-8366S0 Chittagong
Fax: 880-821-723722 Mobile: 0173-103107
9
Highlights of Mercantile Bank Limited
(Amount in Million Taka)
Particulars 2003 2002
Paid-up Capital 639.53 319.765
Total Capital 1,235.23 684.56
Capital surplus/(def icit) 174.30
Total Assets 18,324.73 16,383.17
Total Deposits 16,285.19 15,150.42
Total Loans and Advances 10,775.95 8,896.19
Total Contingent Liabilities and Commitments 7,978.62 5,'ls1.15
Credit Deposit Ratio 74.38./. 49.20./.
Percentage of Classilied Loans against Total Loans and o.427"
Protit Atter Tax and Provision 215.91
Amount of Classified Loans during cufient year 444.O2
Provision kept against Classilied Loans 145.30 12.30
Provision surplus/(dericit) 4.7 4 2.30
Cost ol Fund 8.24% 832%
lnterest Earning Assets 16,783.06 15,279.05
Non-interest Earning Assets ,541 .67

1 1 ,1 04 .1 2
Return on lnvestment (ROl) 6.67"/" 4.O41"
Return on Assets (ROA) 1.18% 1 .577"
lncome from lnvestment 140.55 55.84
Earning Per Share (Tk.) 57.88 84.24
Net lncome Per Share (Tk.) 57.88 84.24
Price Earning Batio N/A N/A

10
Organisation Chart
Shareholders
Board ol Directors r Executive

Committee t
Audit
Committee
Chiel Advisor
Managing Director
Deputy Managing
Director HEAD OFFICE
Company Secretary
Audit & lnspection
Division
BRANCH
Cenlral Accounts
Division
Main
Credit
Dhanmondi Division
Kawran Bazar
Marketing, Development &
Agrabad General Banking Division
Joypara General Services

Division
Banani
Human Resources
Rajshahi Division
Naogaon
lnternalional
Sylhet Division
Board Bazar lnlormation Technology

Division
Nayabazar
Research & Planning
Khatunganl Division
Mohakhali Treasury & Money
Market Division
Mirpur
Ashulia Board Secretariat &

Share Department
Uttara
I
Cost Control
Jubilee Road Deparlment
Elephant Road Law and Becovery

Department
Motijheel
Madam Bibir Hat Card Cell

11
Notice of the Fifth Annual General Meeting
Notice is hereby given to all members of Mercantile Bank Limited (the "Company') that the 5th Annual General
Meeting of the members oI the Company will be held on l\ronday, June '14, 2004, al 11 :00 a.m. at the Winter Garden
of Dhaka Sheraton Hotel to transact the following business and adopt necessary resolutions:
Agenda
1 To confirm the minutes of 4th Annual General Meeting held on 24 March 2003;
2 To receive, consider and adopt the Profit and Loss Account of the Company for the year ended 31st December,
2003 and the Balance Sheet as at that date together with Fleports ol the Auditors and Directors thereon;
3 To declare Dividend out of the profits for the year ended 3'1st December 2003;
4 To elect Directors in place of those who shall retire in accordance with the provision of law and the Articles ol
Association of the Company;
5. To appoint Auditors of the Company Ior the term until conclusion ol the next Annual General Meeting and to lix
their remuneration;
6. To transact any other business with the permission of the Chair.
By Order ol the Board
Mir Md. Hassanul Zahed

Company Secretary (Acting)
Dated: May 16, 2004
Notes
a) The Begister of Members and the Register ol Transfer ot Shares ol the Company shall remain closed from May
25, 2004 to June 14, 2004 (both days inclusive).
b) The Shareholders whose names will appear in the Flegister ol lvlembers of the Company as at the close of
business on May 24, 2OO4 will be entitled to the dividend declared in the AGNI, if any.
c) Any member of the Company entitled to attend and vote at the general meeting may appoint a proxy to attend
and vote on his/her behalf.
d) The inslrument of appointing a proxy duly signed by lhe Member and stamped must be submitted at the
Registered Otfice of the Company at least 72 hours before the meeting.
e) Members are requested to notity the changes ol address, if any, to the Company.
12
Directors' Report
On behall of the Board of Directors, I have the pleasure to present the Fifth
I
Annual Fleport of the Bank along with audited Balance Sheet, Profit & Loss
Account, Cash Flow Statement, Statement of Changes in Equity and Assets
Liability N,laturity Analysis as of December 31, 2003. I am placing a brief
review of operations during 2003, as well as ol the present economic
scenario of our country in the background ol global situation.
World Economy
Global outpul groMh continued to show moderale recovery in 2003. ln the
event with major hostilities in lraq indeed ending quickly, forward-looking
indicators generally showed up, with equity markets strengthening markedly,
accompanied by some pickup in business and consumer contidence,
parlicularly in the United States. Recently there have been growing signs oI
a pickup in activity including investment-particularly in the United States,
Japan and some emerging countries, notably in Asia. With inflationary
pressures subdued, macroeconomic policies have been eased further across
the globe. The world economy experienced a groMh of 3.90% in 2003 as
against 3.00% in 2002. The economies of developing countries experienced
a rise of 6.'10% in 2003 as against 4.60% in 2002. The world economy is
projected to grow by 4.6Ok in 2OO4.
National Economy
Deposits
Bangladesh economy regained groMh momentum in 2002-03 following
20000
stabilization with fiscal and monetary tightening in 2001-02. The GDP growth
16000 rate recorded a rise of 5.30% in 2002-2003 as against 4.40% in 20O1-2OO2.
12000
Exports and imports turned around from the decline in 2001-02 to growth by
,tlll
9.40% and 13.00% respectively in 2002-03. The widened trade deficit was
8000
reduced by the strong groMh ol 22.40% in remittances from workers abroad,
4000 leading to a larger current account surplus and larger reserve accretion. The
0
loreign exchange reserve stood at US$ 2470.00 million in June 2003 as
compared to US$ 1583.00 million in June 2002. The rate of inllation stood at
4.40% as of June 2003 as against 2.807" in June 2002. The rate ol inflation
increased due lo steeper increase in lhe price of food components of
Consumer Price lndex (CPl). lncreases in import prices of petroleum, rice,
12000
edable oil and sugar in 2002-03 were the main contributors to the increases
in the lood and non- food components of Consumer Price lndex (CPl).
ln lhe background of liberalization of economic policies in Bangladesh,

Mercantile Bank emerged as a commercial bank to provide etficient banking
{.,lll
services with a view to attaining faster economic growth and accelerating
socio-economic development of the country. The Bank was incorporated on
[i]ay 20, 1999 in Bangladesh with its Registered Oflice at 61, Dilkusha
Commercial Area, Dhaka-1000, Bangladesh and started banking operation
on June 2. '1999.
13
ffi- { Deposits
The Bank mobilized total oeposits oi Tk.16,285.'19 million as of December
31,2003 as compared to Tk.15,150.42 million in 2002. Competitive interest
rates, deposit mobilization etforts of the Bank and confidence reposed by the
customers in the Bank contributed to the notable growth in deposits. The
Bank evolved a number of attractive deposit schemes to cater to the
requirement of small and medium savers. This improved not only the
quantum ol deposits, it also brought about qualitative changes in the deposits
struclure.
Advances
The Bank has formulated its policy to give priority to small and medium
businessmen while financing large-scale enterprises through consortium of
banks. Total loans and advances of the Bank stood at Tk.'I0,775.95 million
as of December 31,2003 as compared to Tk.8,896.'19 million in 2002. N,laior
sectors in which the Bank extended credit included trade and commerce,
garments industry, large and medium scale industries and construction.
Consumers Credit Scheme

The Bank has introduced Consumers Credit Scheme to cater to the credit
needs of the low and middle-income groups Ior household durables.
Consumers Credit Scheme has attracted good response from the customers.
An amount of Tk.169.98 million, which was '1.58% of the total credit portfolio,
was outstanding under the Scheme as oI December 31, 2003.
Small Loan Scheme

lmport
The Scheme has become popular among shopkeepers since its launching.
20000
At the end of year 2003, an amount of Tk.66.30 million was outstanding
16000
under the Scheme. Recovery rate under this Scheme is quite satisfactory.
12000 lmport Business
.lll
4000
From the very beginning, the Bank has embarked on extensive foreign
exchange business with a view to facilitating international trade transactions
4000 of the country. The Bank has established '10,986 Letters of Credit amounting
to Tk.20,380.80 million as of December 3'l ,2003 as against 10,076 Letters of
0
Credit amounting to Tk.'15,1'12.50 million in 2002. ltems of imports financed
93XR by the Bank included capital machinary, CFI coil, eiectronic equipments, rice,
wheat, seeds, CDSO, palmolein, cement clinkers, dyes, chemicals, raw
cotton, garments accessories etc.
Export
Export Business
16000
The total export business handled by the Bank amounted to Tk.15,250.60
12800 million as of December 31 ,2003 as compared to Tk.1'1 ,377.30 million in 2002.
The Bank has made significant contribution to Readymade Garments sector
9600
which was responsible fot 75o/" ol total exports of the country in 2002-03.
.rlll
6400
Readymade Garments has not only generated employment oI semi-skilled
men and women, it has also led to emergence ol forward looking
3200 entrepreneurs in the country, absence of which was regarded as a constraint
to development efforts. Apart from Readymade Garments, export items
0
handled by the Bank included jute goods, leather, plastic scrap, handicrafts
etc.
14
Foreign Remittances
Foreign remittances handled by the Bank stood at Tk.474.OO million as of
December 31,2003. Countries and regions from which inward loreign
remiftances were received included USA, UK, Canada, Germany, l\,liddle
East etc.
Operating Protit
The operating profit of the Bank amounted to Tk.575.32 million in 2OO3 as
against Tk.461.24 million in 2002. After necessary provision net profit stood
alfk.427.32 million as oI December 3'l ,2003. An amount of Tk.21'1 .41 million
has been set aside for our tax contribution to National Exchequer.
Total lncome
Total income increased from Tk.l,592.30 million in 2OO2 to Tk.'1,989.72
million in 2003. lnterest income accounted tot 79.A4y", exchange gains
9.787", commission 7.64y" and other income 2.74o/o ol lotal income in 2OO3
as against 80.46%, 9.071",7 .39ok and 3.08% respectively in 2002.
Total lncome
([4i]lion Tk.)
Components Amount % of Total
lnterest lncome 1,588.67 79.84
Exchange Gains 194.54 9.78
Commission 151.9'1 7.64
Total lncome Other Income 54.60 2.7 4
Total 1,989.72 100.00
lnterest lncome
lnterest income increased from Tk.1,281.'19 million in 2OO2 to Tk.'1,588.67
million in 2003. lnterest on loans and advances accounted for 76.85%,
interest on deposits with other banks 14.217", intercst on Treasury Bi s
: lnteresl hcome 79.84olo 8.85% and other interest income 0.09o/o of total interest income in 2OO3 as
I Eachange Gains 9.78qla against 79.50%, 15.93ok, 4.36o/" and O.21ok respectively in 2002.
I Commission 7.6a%
I Otherlncome 2.74%
lnterest lncome
(N,,lillion Tk.)
Components Amount 7o of Total

lntetest lncome lnterest on Loans & Advances 1"n,o, 76.85
lnterest on Deposits with other banks 225.76 14.21
lnterest on Treasury Bills 140.55 8.85
Other Interest lncome 1.44 0.09
* Total 1,s88.67 .l00.00
lnterest Expenses
lnterest expenses moved up from Tk.923.'l'l million in 2OO2 to Tk.1,115.82
lnlereston Loans & Advances 76 859i)
lnleresto. Deposts wilh other banks 14.21% million in 2003. lnterest on deposits under schemes was the larqest
I lnteresl onTreasury B ls8 85% component of interest expenses and accounted lor 50.747" oI total interest
I Other hterest lncome OO9q"
expenses in 2003 as compared to 36.30% in 2002. lnterest on FDR
'15
accounted lor 41.79'L, interest on savings deposits 2.807o, interest on call

deposits 2.02%, interest on short-term deposits '1.65% and other interest
.ffierrsr expenses '1.00% of total interest expenses in 2003 as against 51.44%,
5.84"k, 2.32'/., 1.67'k and 2.43% respectively in 2002.
lnterest Expenses
(Million Tk.)
Components Amount % ot Total

lnterest on Deposit Schemes 566.17 50.74
lnterest on Fixed Deposits 466.35 41 .79
lnterest on Savings Deposits 3-t.24 2.AO
lnterest on Call Deposits 22.51 2.O2
lnterest on Short Term Deposits 18.35 t.b5
Other lnterest Expenses 11 .20 1.00
Total 1,115.82 100.000/0
Net lnterest lncome
Net interest income increased from Tk.358.08 million in 2002 b fk.472.85

million in 2003. Gross interest income of the Bank amounted to Tk.1,588.67
million and interest expenses amounted to Tk.'1,115.82 million during 2003.
lnlerest Expenses Net lnterest Margin
Bank's net interest margin, which is derived by net interest income divided by
average earning assets, was 3.36% in 2003 as compared to 3.'16% in 2002.
\ This indicates a reasonable spread between interest income and interest
expenses.
lnteresto. Deposit Schemes 50 74./" Non-lnterest lncome

l.lerest on Fixed Deposils 41 .79'l"
Non-interest income increased from Tk.311.11 million in 2002 to Tk.401.05
I lnlereslon Savlnqs Deposlb2 aO%
S Inlereslon Calloepos ts 2.02% million in 2003. Non-interest income was 20.16/" ol the total income in
I lnteresr on Shonlerm Deposns 1 65o/a
'19.54olo
X Olherlnleresl Exoenses 1 OO%
2003 as compared to in 2002. Exchange gains accounted for
48.5'1%, commission 37.88% and other non-interest income 13.61% of
non-interest income in 2003 as against 46.42"h, 37.AO"h and 15.78%
Non-lnterest lncome respectively in 2002.
Non-lnterest lncome
(L,lilion Tk.)
Componenls Amount % ol Total

Exchange gains 194.54 48.51
Commission '15'1.91 37.88
Exchange gains43.51%
Other non-interest income 54.60 13.61
I Other non- nieresl income 13.61'/. Total 401.05 100.00

16
Total Expenses
The total expenses of the Bank amounted to Tk.'1,4'14.40 million during 2003
as compared to Tk.1 ,13'l .06 million in 2002. lnterest expenses accounted for
78.89%, salaries and allowances '10.63%, rent, rates, taxes etc. 2.93o/o,
Stationery, Printing & Advertisement '1.31% and other expenses 6.2470 of
total expenses in 2003 as against 81.61y",9.34o/o,3.07ok, 1.43y" and 4.557"
respectively in 2002.
Total Expenses
(Million Tk.)
Components Amount % ol Total

lnterest Expenses '1,'1'15.82 78.89
Salaries & Allowances 150.35 10.63
Rent, Rates, Taxes etc. 41 .45 2.93
.1.3.1
Stationery, Printing & Advertisement 18.53
Other Expenses 88.25 6.24
Total 1,4',14.40 100.00
Non-interest Expenses
Non-interest expenses moved up from Tk.207.95 million in 2002 to Tk.298.58
million in 2003. Non-interest expenses was 21.11% of the total expenses in
Total Expenses 2003 as compared to 18.39% in 2002. Salaries & allowances accounted for
50.36%, Bent, Rates, Taxes etc. for 13.88%, Stationery, Printing and
Advertisements 'tot 6.21o/0, Postage, Telegram, Telephone lot 4.21y" and
other expenses for 25.34% of total non-interest expenses in 2003 as against
50.421", 16.7oo/o,7.79"/a, 5.5O/" and '19.19% respectively in 2002.
Non-lnterest Expenses
(li,,lillon Tk)
lnlerest Expenses 78 89% Components Amount % ol Total
Salaries & A lowa.ces 10 63q.
Salaries & Allowances 150.35 50.36
S Bent, Bates Taxes etc.2 93%
i Slal onery Pr ntina & Adv 1 3l?" Rent, Rates, Taxes etc. 41 .45 13.88
Olher Expenses 6.24% Stationery, Printing & Advertisement 18.53 6.21
Postage, Telegram, Telephone 12.57 4.21
Other Expenses 75.68 25.34
NonJnterest Expenses Total 298.58 100.00
Asset Utilization Ratio

Asset utilization ratio was '10.86% in 2003 as compared to 9.71./" in 2OO2.
This measures how the total assets of the Bank are etfectively utilized to
generate net operating income.
Sa ar es & Alowances 50.369a Operating Efficiency Ratio

Fent, Rates, Taxes 6tc. t3.aa?'"
Operating efficiency ratio al 71.O91o in 2003 was almost unchanged at
N Stationery, Prinlng & Adv 6.219;
r, Postage Ielegram, Te ephone 4.21% previous year's level of 71.06%. This measures how much operating
.. . other Expenses 25 3496 expenses are incurred to generate operating revenues.
17
slo\l\o (-)r' Earning Base in Assets

lkftonlih Ihnk Limhed Earning Base in Assets of the Bank is 91.59% in 2003 as compared to
93.26% in 2OO2. Despite small reduction in Earning Base in Assets, the ratio
indicates efficient utilization of resources to earn revenues.
Net protit
The Bank earned net profit ol Tk.427.32 million in 2003, break-up of which is
as under:
Net Profit
(Mi lion Tk )
Particulars Amount
lnterest lncome 1,588.67
lnterest Expenses (1 ,115.82)
Net lnterest lncome 472.85
Provision against Unclassified Loans (15.00)
Provision for Classified Loans (133.00)
Non-lnterest lncome 40'1.05
Non-lnterest Expenses (298.58)
Net Nonlnterest lncome 102.47
Net Prolit 427.32
The Board of Directors recommended stock dividend ol 25yo tot lhe yeat
2003. The Bank paid out 40% dividend to the shareholders, 35% cash and
5% bonus for the year 2002.
Financial Position
Asset Portfolio
The Bank's total assets outstanding as ol December 3'1, 2003 amounted to
fki8,324.73 million as compared to Tk.'16,383.17 million in 2002. Of the
total assets outstanding in 2003, loans & advances constituted 58.80%,
balances with other banks'14.70%, investments 11.50%, money at call and
short notice 6.77yo and other assets 8.23"/" as against 54.30%, 23.00%,
8.447.,7.69y" and 6.57'l" respectively in 2002.
Asset Portlolio
Assel Porllolio (N,4 llon Tk.)
Components Amount % ot Total

Loans & Advances 10,775.95 58.80
Balances with other Banks 2,693.12 14.70
lnvestments 2,107 .26 '11.50
l\,4oney at Call & Short Notice 1,240.OO 6.77

Other Assets '1,508.40 8.23
Total 14324.73 100.00
iir: Loans & Advancs 58.80%
& Balanc€s wilh olh€r Banks 14.70%

Credit Portfolio
I lnvestments 11.50%
& Money ai Call& Shon Notice 6.77% The Bank's total credit outstanding as of December 31, 2003 stood at
I Olher Asseis 8 23%
Tk.10,775.95 million as compared to Tk.8,896.'19 million in 2002. The Bank
18
mainly extended credit facilities to the private sector for trade and commerce
as well as for working capital needs. Break-up of advances for the year 2OO3
is as follows:
Credit Port olio

(Million Tk.)
Components Amount 70 ot Total
Trade & Commerce 4,O99.20 38.04
Jute, Cotton & Apparels 1,82'1.60 16.90
Large & Medium Scale lndustries 1 ,7'1 9.'10 15.95
Construction 580.40 5.39
Transport & Communication 175.80 1 .63
Consumer Goods 169.98 1.58
Small Scale & Cottage lndustries 67.70 0.63
Others 2,142.17 19.88
Total 10,775.95 1fi).00
Non-Performing Loans
The Bank has fk.444.O2 million non-performing loans as of December 3.1,
2003 against which required provision has been made.
Provision against Unclassif ied Loans

The Bank has made a provision of Tk.103.14 million upto December 2OO3 as
1% against unclassified loans as per Loan Classification Guidelines of
Bangladesh Bank, the Central Bank of the country.
Provision against Classilied Loans

The Bank has made a provision of Tk.145.30 mittion for the classified Loans
upto December 2003 as per Loan Classification Guidelines of Bangladesh
Bank.
lnvestment Portfolio
Credit Portlolio
ln an effort to secure more stable earnings from its investments, the Bank
focused its attention on investment in Government securities and call money
market. This strategy also rellected the Bank's intention to improve its capital
adequacy ratio by securing assets with lower risks.
lnvestment Portlolio
(Milon Tk )
.: TBde & Commerce 38 04% Components Amount % ol Total
tt Jur6, conon & AppaEls 16.90%
Deposits with other Banks 2,693.12 44.59
I Large & Medium Scare rndusrries 15.95%
! conslruclion 5.39% Treasury Bills and T & T Bond 2,O70.OO 34.27

& Tansporl & Communi€rion 1.63%
Money at Call & Short Notice 1,240.OO 20.53
I Consumer G@ds 1 584/q
SmarlScab a cottage l.duslries 0.63./.
lnvestment in Shares and Bonds 36.90 0.6'1
I
I Others 19.88% Total 6,040.02 't00.00
19
Funding Structure
The Bank's principal source of lund is deposits, which constituted 88.87% ol
total banking funds in 2OO3 as compared lo 92.487. in 2002. The Bank's
paid-up capital accounted for 3.49%, reserves 3.25% and other sources
4.39% oI total funds in 2003 as against 1.95%, 2.23"/. and 3.34%
respectively in 2002.
Funding Structure
(M lhon Tk.)
Components Amount % ol Total

Deposits 16,285.'19 88.87
Paid-up Capital 639.53 3.49
Reserves 595.70
Others 804.31 4.39
Total 1A'3,24.73 100.00
Deposit Mix
Deposit under Savings Schemes surpassed FDR and became the largest
component oI the deposit resources in 2003. Deposits under savings
schemes amounted to Tk.6,306.94 million, which was 38.73% ol total
deposits in 2003 as compared to 27.23/" in 2OO2. Fixed deposits accounted
lot 32.63'/", call deposits 4.91%, savings deposits 4.85%, current deposits
3.04%, short term deposits 2.62y" and other deposits '13.22y" ol lolal
deposits in 2003 as agaanst 42.20%, L97"k, 3.58"/", 2.14/", 2.4O'k and
12.44'/. in 2OO2.
Funding Slructure
DePosit Mir
Ik )
(Mrlhon
Category Amount % ot Total

\ Deposits under Schemes 6,306.94 38.73
FDR 5,314.27
Call Deposits 800.00 4.91
Savings Deposits 749.47 4.85
Current Deposits 494.62 3.04
gi D€porrls 88.87%
Short Term Deposits 426.14
I thicup c€pial 3.49"[ .t3.22
Others 2,153.75
I R.se^/€s 3.25%
a o$e,s 4.a9% Total 't 6,285. t 9 100.00
Capital
Deposit Mix The Authorized Capital of the Bank was Tk.1,200.00 million of 12,000,000
ordinary shares oI Tk.100 each as of December 31 , 2003.
Paid-up Capital ol the Bank was Tk.639.53 million of 6,395,300 ordinary
shares of Tk.'100 each as of December 31.2003. The Bank raised an
additional capital of Tk.319.765 million through lnitial Public Offerings (lPO).
The shares ol the Bank have been listed both in Dhaka Stock Exchange and
Chittagong Stock Exchange and are being traded at prices higher than the
book value.
Z oeFst! un(br Sd€m€s 34.rc"6
- FDR 32.63e. Capital Adequacy
I cal osposG 4.91?"
As per the guidelines of Bangladesh Bank, the Bank adopted BIS (Bank for
! SMngs D€posils 4.85%
! Cur€nl D6post5 3.04% lnternational Settlements) risk adjusted capital standards to measure capital
I ShodTom Ooloslts 2-62"2 adequacy. The Bank's Capital Adequacy Ratio stood at 10.48% at the end of
I oolels 13.22% December, 2003 as against minimum requarement of 9.0O%.
20
Capital Adequacy
(Millon Tk )
Particulars Amount
Core Capital (Tier-l) 1,129.77
Paid-up Capital 639.53
Statutory Reserve 281.03
Proposed Bonus Share 159.88
Dividend Equalization Account 45.68
Retained Earnings 3.65
Supplementary Capital (Tier-ll) 105.46

1% Provision againsl Unclassified Loans 103.14
Exchange Equalization Fund
Total Risk-Adjusted Capital 1,235.23
Total Risk-Weighted Assets 1.1,788.09
Minimum
Capital Adequacy Bequiremenls Aclual
Tier-l 4.50"k 9.58%
Tier-ll 0.90%
Total Capital LOO"/" 10.48y"
Branch Network
The Bank commenced its business on June 2, 1999. The first branch was
opened at Dilkusha Commercial Area in Dhaka on the inauguration day of the
Bank. The number of branches ol the Bank stood at 20 (Twenty) at the end
of 2003. '16 branches are located at major trade centres of the country while
remaining 4 branches are at the rural areas of the country. The Bank intends
to open 5 more branches by the end of the year 2004.
Correspondent Relationship
The Bank has established correspondent relationship across the world with
a number ol foreign banks namely Citibank N.A., The Bank o, Tokyo
Mitsubishi Ltd., Standard Chartered Bank, American Express Bank, HSBC,
Commerzbank, MashreqBank, Commonwealth Bank of Australia, Scotia
Bank, Toronto Dominion Bank, Unicredito ltaliano, Wachovia Bank, N.A.,
Hutton National Bank, Hypovereinsbank, Bank Austria, Sumitomo Mitsui
Banking Corp., ING Bank, United Bank of lndia, lolct Bank etc. The number
of foreign correspondents is 240 as of December 31, 2003. Efforts are being
continued to further expand the correspondent relationship to facilitate
Bank's growing foreign trade transactions.
Human Resources Development

ln today's competitive business
environment, the quality of human
resources makes the difference. The
Bank's commitment to attract high quality
I
persons to work for it is reflected in the
etforts of the Bank. ln the face of today's
globalization, the Bank envisages to
develop highly motivated workforce and
equip them with latest skills and
technologies. The Bank evolves human
2'l
resources development strategy with a view to ensuring good working

environment, a high levelof loyalty and commitment, devolion and dedication
on the part of the employees.
The Bank has set up a Training lnstitule for providing training lacilities to its
executives/oificers. The Training lnstitute has already conducted a number of
foundation and specialized training courses. A number of oflicers was sent to
Bangladesh lnstitute of Bank [ranagement (BIBM) and other training
institutes at home and abroad for specialized training on various aspects of
banking. The Bank belaeves in professional excellence and considers its
working lorce as its most valuable asset and the basis ol its etficiency and
strength.
Management
The Board of Directors consists of eminent personalities Irom commerce and
industry ol the country Mr. [,,ld. Abdul Jalil, M.P, Founder Chairman of the
Board of Directors, is a businessman besides being an eminent personality
of lhe country
The Bank is manned and managed by highly qualiried and efficient

prolessionals. The Chief Executive Officer of the Bank is Mr. M. Taheruddin
who has rich experience ol managing both the nationalized and the private
sector banks as l\,lanaging Director. Mr. Lutlar Rahman Sarkar, Chief Advisor
of the Bank, is the former Governor of the Central Bank oI the country. He
brings with ham a wealth of experience of managing both public and private
sector banks.
R&D: lnvesting into the Future

Excellence in banking operalion depends largely on a well-equipped and
efficient Research and Development Division. Such activities require the
anvestment of substantial resources and a set of qualified personnel with
multidisciplinary background. Although it is not possible at this stage to
undertake R&D activities similar to those ol the banks in the developed
countries, Mercantile Bank has established a core Besearch and Planning
Division comprising skilled persons Irom the very inception of the Bank.
Office Automation
Banking operations oI the branches have been
computerized to minimize costs and risks and to
optimize benefits and increase overall efliciency for
improved services. The Bank generates the relevant
Iinancial statements at the end of the day. The Bank
has installed Reuters Screen for smooth operation of
loreign currency dealings. The Bank has also hosted
a web page of its own to take a place in the World
Wide Web. On-line Banking has been introduced by
22
the Bank to provide better services to the customer. The Bank has already
introduced ATM 'Q-Cash'. The Bank has installed SWTFT to facititate quick
s inlernational trade and payments arrangements. The Bank

introduce Credit Card soon.
is going to
Financial Products and Services

The Bank has launched a number of financial products and services since its
inception. Among them Monthly Saving Scheme, Monthty Benefit Scheme,
Double Benelit Deposit Scheme, Special Saving Scheme, Lile Long pensron
Scheme, Consumer Credit Scheme, Small Loan Scheme and Lease Finance
Scheme have attained wide acceptance among the people.
Monthly Savings Scheme

The prime objective of this scheme is to encourage people to build up a habit
ol saving. Under this scheme, one can save a fixed amount of money every
month and get a lucrative amount of money after five, eight or ten years.
Monthly Benefit Scheme

Under this scheme, one can deposit cenain amount of money for five or more
years and in return he will receive benefits on monthly basis. Benefits start
right from the first month of opening an account under the scheme and
continue upto five or more years.
Double Benetit Deposit Scheme

Under this scheme, depositoas money will be doubled in a seven-year period
and the scheme is one of the highest yielding deposit schemes rn
Bangladesh.
Special Savings Scheme

Under this scheme, depositoas money will be tripled in 'l'l-year period. The
main attraction of the scheme is that one can get his money after one year
and onward with attractive benelits.
LiIe Long Pension Scheme

Lile Long Pension Scheme has been evolved especially for old age. Under
this scheme one can get life long benelit if he deposits speciric amount per
month for a period of 10, 15, 20, or 25 years. The scheme can also be
opened in the name of minors.
Consumers' Credit Scheme

Consumers' Credit is relatively new field of collateralJree linance of the
Bank. People wilh limited income can avail of this credit facility to buy
household goods including computer and other consumer durables.
Small Loan Scheme

This scheme has been evolved especially for small shopkeepers who need
credit facility for their business and cannot provide tangible securities.
Lease Finance
This scheme has been designed to assist and encourage the genuine and
capable entrepreneurs and professionals for acquiring capital machineries,
medical equipments, computers and other items. Terms and conditions of
this scheme have been made easier in order to help the potential
entrepreneurs to acquire equipments of production and services and repay
gradually from earnings on the basis of'Pay as you earn'.
- 1-a[ Doctors' Credit Scheme
Doctors'Credit Scheme is designed to facilitate linancing to lresh medical

graduates and established physicians to acquire medical equipments and
set up clinics and hospitals.
Rural Development Scheme
Rural Development Scheme has been evolved for the rural people of the
country to make them self-employed through financing various income
generating projects. This scheme is operated on group basis.
Women Entrepreneurs Development Scheme
Women Entrepreneurs Development Scheme has been introduced to

encourage women in doing business. Under this scheme, the Bank finances
the small and cottage industry projects sponsored by women.
SME Financing Scheme
Smalland l\iledium Enterprise (SME) Financing Scheme has been introduced

to assist new or experienced entrepreneurs to invest in small and medium
scale industries.
Mercantile Bank Foundation

The Bank has set up Mercantile Bank Foundation for extending benevolent
services to the society. The Bank contributes 1% of operating prolit or
Tk.4.00 million, whichever is higher, to Mercantile Bank Foundataon every
year. The Foundation has been established with tollowing objectives:
Mercantile Bank Prize to 8(eight) eminent personalities of the country Ior

the outstanding contribution in the lields of Economics and Economic
Research, Bengali Language and Literature, Science and Technology,
Education and Culture, Journalism, Sports, Research on Liberation War
and lndustry and Commerce.
2. lnterest free education loan for the meritorious but poor students
24
3. To conduct research on Bengali language and literature.
4. Book Purchase and Distribution Policy to encourage writers and

publishers of the country
5. lnterest free Loan to the unemployed educated people.
6. Donation for handicapped artists, litterateur and distressed people.
7. Project for the development of shelter-less children.
Acknowledgments
Mercantile Bank Limited has gained firm confidence in the minds of its clients
within a short period of its operation. The success is primarily attributed to
prompt and bold decision making, efficient and cordial services, economic
use of resources and introduction oI new financial products and technologies.
The continued endeavors of the Management and Staff of the Bank under
prudent guidance and timely support of the Board of Directors have
substantially contributed to success of the Bank. The Board of Directors
takes this opportunity of expressing its heart-felt appreciation and gratitude
to the Government of the People's Republic of Bangladesh and Bangladesh
Bank, for their help and assistance, valuable guidance and advice extended
to the Bank lrom time to time.
The Board of Directors also expresses deep appreciation to lvlanagement

and all members of statf for their meritorious and relentless services and also
to the clients, whose continued support and patronage have made the results
possible.
On behalf of the Board of Directors
Md. Abdul Jalil

Chairman
25
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3B
Auditors' Report
we have audited the accompanying Batance sheet of Mercantile Bank Limited as at 31 December
2003 and the related Profit and Loss Account, cash FIow statement, statement of changes in
Equity and notes to the Financial Statements for the year then ended.
Bespective Responsibilities ot the Bank and Auditors

Mercantile Bank management is responsible for preparing these financial slatements, which give a
true and fair view in accordance with Bangladesh Accounting standards (BAS). our responsibitity
is to express an independent opinion based on our audit on those financial statements and to report
our opinion to the shareholders. This responsibility is established by Bangtadesh standards on

Auditing (BSA).
Basis ol Audit Opinion
we conducted our audit in accordance with Bangladesh standards on Auditing (BsA). our audit
includes examining, on a test basis, evidence relevant to the amounts and disclosures in the
financial statements. our audit also includes an assessment of the signilicant estimates and
judgments made by Mercantile Bank Limited in the preparation ol the financial statements, and of
whether the accounting policies are appropriate to the company's circumstances, consisten y
applied and adequately disclosed.
We planned and performed our audit so as to obtain all the information and explanations, which we
considered necessary in order to provide us with sufficient evidence to give reasonable assurance
that the financaal statements are free from material misstatement. ln forming our opinion, we also
evaluated the overall adequacy of the presentation of inlormation in the financial statements. we
believe that our audit provides a reasonable basis lor our opinion.
Opinion
ln our opinion, subject to the fact that (note 28.1), the financial statements prepared in accordance
with Bangladesh Accounting standards (BAs), give a true and fair view of the state of the bank,s
atfairs as at 31 December 2003 and of the resutts of its operations and its cash Flows for the year
then ended and comply with Bank Companies Act, 199j, the rules and regulations issued by
Bangladesh Bank, Companies Act, 1994 and other appticable laws and regutalions.
We also report that:
(i) we have obtained all the information and explanations which to the best of our knowledge
and beliel were necessary for the purpose of our audit and made due verification thereof:
(ii) in our opinion, proper books of account as required by law have been kept by the Bank so
lar as it appeared from our examination ol those books and proper returns adequate for the
purpose of our audit have been received from branches not visited by us;
(iii) the Bank's Balance Sheel and lncome Statement dealt with by the report are in agreement
with the books of accounts and returns;
39
(iv) the expenditure incurred was for the purpose of the Bank's operations;
(v) read in conjunction with the notes to the Financial Statements, the linancial position of the
Bank as on 31 December 2oo3 and the prolit lor the year then ended have been properly
reflected in the financial statements, the linancial statements have been prepared in
accordance with the Generally Accepted Accounting Principles;
(vi) the Financial Statements have been drawn up in conlormity with Bank Companies Act, 199'1
and in accordance with the accounting rules and regulations issued by Bangladesh Bank;
(vii) the Financial Statements to the prescribed standards set in the accounting
conlorm
regulations issued by the Bangladesh Bank after consultation with the professional
accounting bodies of Bangladesh;
(viii) the records and statements submitted by the branches have been properly maintained and
consolidated in the linancial stalements;
(ix) adequate provisions have been made lor advances, which are, in our opinion, doubtful of
recovery;
(x) the Capital Adequacy Ratio (CAR), as required by law, has been maintained adequately
during the year; and
(xi) the inlormation and explanations required by us have been received and found satislactory.
*odawnrlto,,ltruwlO tn
Hoda Vasi Chowdhury & m&Co
9/
Chartered Accountants Chartered Accountants
Dated, 30 March 2004

Dhaka, Bangladesh
40
Balance Sheet ,.r at 3t DeL'ember. )001
2003 2002
Notes Taka Taka
PBOPERTY AND ASSETS
Cash 3 805,824,531 547,029,631
Cash in hand (lncluding Ioreign currencies) '128,984,705 104,907,297
Balance with Bangladesh Bank and Sonali Bank 676,839,826 442,122,334
(lncluding foreign currencies)
Balance with other Banks and Financial lnstitutions 4 2,693,120,982 3,767,381,574
ln Bangladesh 2,673,503,166 3,744,934,'198
Outside Bangladesh 1 9,61 7,816 22,447,376
Money at Call and Short Notice 5 1,240,000,000 ,260,000,000
lnvestments 6 2,107,264,900 ,382,289,000
Government 2,070,369,900 1,380,289,000
Others 36,895,000 2,000,000
Loans and Advances 7 10,775,945,531 8,896,193,113
Loans, Cash Credit. Overdraft etc 10,303,124,096 8,293,919,325
Bills Purchased and Discounted B 472,821,435 602,273,788
Fixed Assets lncluding Premises, Furniture and Fixtures 8 81,502,437 69,546,250
Other Assets I 621,071,664 460,726,707
Non-Banking Assets
TotalAssets '18,324,730,045 16,383,166,275
LIABILITIES AND CAPITAL
Liabilities
Borroryings from other Banks, Financial lnstitutions and Agents '10 800,000,000 1 ,529,887,824
Deposits and Othsr Accounls '1'1 14,798,596,508 13,151,949,316
Current Accounts and other Accounts 1'1 .1 2,034,955,516 1 ,582,150,0'19
Bills Payable 11 .2 324,332,820 397,893,847
Saving Banks Deposits '11
.3 789,467,592 54'1,776,424
Fixed Deposits 11.4 5,314,266,247 6,392,778,755
Bearer Certificates ol Deposit 1'1.5 28,635.943 112,491,834
Deposits Under Schemes 1'1 .6 6,306,938,390 4,124,8s4,437
Other Liabilities 12 1,596,363,206 1,'107,236,706
Total Liabilities 17,194,959,714 15,789,073,846
CapitaUShareholders' Equity
Paid-up Capital '13
639.530,000 319,765,000
Share Premium 31,197,347
Statutory Reserve 14 281,032,622 195,532,622
Other Reserve 15 45,680,250 45,680,250
Proposed Bonus Share 159,882,500
Surplus rn Prolit & Loss Account 16 3,644,959 ,917,210
1
Total Shareholders' Equity 129 770,331 594,092,429

Total Liabilities and Shareholders' Equity 18,324,730,045 16,383,166,275
These Iinancial statements should be read in conjunction with the annexed notes.
Jrrfua qlrsp =/t<sd**

Director ' Director Director Manag n9 Direclor
Auditors'Report to the Shareholders, see annexed report of even date
tldawrt]lrg.,lhumoto
I
Hoda Vasi ChowdhuD/& Co &Co
Dated. 30 March 2004
Dhaka, Bangladesh
41
Off-Balance Sheet ltems as at lt December, 2003
Note 2003 2002

Taka Taka
OFF. BALANCE SHEET ITEMS
CONTINGENT LIABILITIES A
Acceptances and Endorsements 3,257,885,240

Letters ol Guarantee 17 697,745,462 461,786,914
lrrevocable Letters of Credit 4,003,103,041 4,685,211 ,033
Bills for Collection 19,442,527 4,148,880
Other Contingent Liabilities
Total 7,978,616,270 5,1sl,r46,827
OTHEB COMMITMENTS B
Documentary credits and short term trade-related transactions

Forward assets purchased and forward deposits placed
Undrawn note issuance and revolving underwriting facilities
Undrawn formal standby facilities, credil lanes and other
commitments
Total
TOTAL OFF.BALANCE SHEET ITEMS INCLUDING

CONTINGENT LIABILITIES 7,974,616,270 5,151,146,827
These financial statements should be read in conjunction with the annexed notes
hfue q:'sr
Director Director Director Managing Director
Auditors' Report to the Shareholders, see annexed report of even date
tlodawr ilta e,llaa t1 O to

Hoda vasi chowdhu#& Co Qasem & Co
Dated. 30 March 2004

Dhaka, Bangladesh
42
Profit & Loss Account ior the vear ender!.31 Decemtrcr. 200.J
2003 2002
Notes Ta ka Tata
lnterest lncome '18 1,448,115,807 1 ,225,352,031
Less: lnterest Paid on Deposits, Borrowings etc '19 1,115,815,677 923,110,543
Net lnterest lncome 332,300,130 302,241,48A
lnvestment lncome 140,550,454 55,841,980
Commission, Exchange and Brokerage 20 346,455,034 262,016,'193
Other Operating lncome 21 54,595,329 49,094,820
541,600,817 366,952,993
Total Operating lncome 873,900,947 669,1
Salaries and Allowances 23 147,988,906 103,335,569
Rent, Taxes, lnsurances, Electricity etc. 24 41,451,880 34,723,442
Legal Expenses 25 569,090 428,'108
Postage, Stamps, Telecommunication etc. 12,567,308 11,443,444
Auditors'Fees 177,230 80,000
Stationery, Printings, Advertisements etc. 26 18,530,857 16,200,147
l\ilanaging Directoas Fees 2,360,000 2.340,000
Directors'Fees 22 2,357,875 1,964,750
Depreciation & Repair ol Faxed Assets 14,988,841 12,634,177
Other Expenses 57,584,743 24,803,640
Total Operating Expenses 298,576,730 207,953,277
Profit before Provision 575,324,217 461,241,204
Specific provision for Classified Loans & Advances 12.2 '133,000,000 11,000,000
General Provisions for Unclassified Loans and Advances 12.2 15,000,000 21,200,000
Total Provision 148,000,000 32,200,000
Total Prolit betore Taxes 427,324,217 429,041,204
Provision for Taxation 21-t ,411 ,315 172,500,000
Net Profit after Taxation 215,912,902 256,541 ,204
Relained Surplus brought forward from previous year 1,917,210 13,227,606
Balance of Bonus Share Premium brought forward 31,197,347
249,027,4s9 269,768,810
Appropriations
Statutory Reserve 85,500,000 85,885,600
Cash Dividend 106,587,250
Dividend Equalization Fund 45,680,250
Proposed Bonus Share 159,882,500 '15,230,000
Share Premium 14,468,s00
Retained Surplus 3,644,959 917,210
249,027,459 269,768,810
Earning Per Share (EPS) 57.88 44.24
These financial statements should be read in conjunction with the annexed notes
jflft"il qlrgK --/t-sd*

Director Director Direclor Managi Director
Auditors' Report to the Shareholders, see annexed report of even dale
llodawr (t s,llu vvl Ot to

Hoda Vasi Chowdhuryl Co A m&Co
C h a rte red Accou nta-nls Chartered Accountants
Dated, 30 March 2004
Dhaka, Bangladesh
43
Cash Flow Statement ior the vear encled 3t Decemher. 2001
2003 2002
Taka Taka
Cash Flow from Operating Activities Note
lnlerest Received 1,588,666,261 1,487,368,224
lnterest Paid (1,11s,815,677) (923,110,543)
Fees & Commission Received 151,913,099
Payment to the Employees (147,988,906) (89,171,169)
Payment to Suppliers (18,530,857) (r6,200,146)
lncome Tax Paid 181 ,721 ,1321 (216,789 ,755)
Received from olher operating activilies 249 ,'t37 ,264 49,094,820
Exchange Gain 't94,541,935 49.094.820
Other Operating lncome 54,595,329
Paymenl lor other operating activities (120,547,062], \78,4t7,499)
Rent, Taxes, lnsurances, Eleclricity (41,451,880) \34 ,723,442)
Legal Expenses (s69,090) (428,108)
Postage, Stamps, Telecommunicalion (12,567,s08) (11,44s,444)
Auditors' Fees (177,230), (80,000)
Repair & l\,laintenance (3,478,936) (2,984,116)
Managing Director's Fees (2,360,0o0) (1,990,000)
Directors'Fees (2,357,87s], (1,964,750)
Other Expenses \57,584,7431 (24,803,639)
Operating prolit before changes in Operating Assels & Liabilities 505,112,990 212,773,932
lncrease / Decrease in Operating Assets & Liabililies
Loans & Advances to Customer (1,879,752,418) (2,188,777,288)
Other Assets (ltem-wise) .623,825 17,430,785
Advance Deposils (18,000) (6,000)
Stock ol Stationery 689,330 (713,555)
Suspense Account (1.231,234) 2,339,717
Stamps an Hand (1,374,390) 6.164
Advance Bent (456,600) 10,559,026
DD Paid without Advice (70,000) 546,697
Adiusting Account Debit (76,162,931) (7,416,509)
Deposit lrom other Banks (729,887,824) 3,690,329,664
Deposit from Customers 1,646,647,191
Olher Liabilities account of Customers
Other Liabilities 236,302.435 316,766,098
Net Cash Received from Operating Activities (300,201,451) 2,048,523,191
B. Cash Flow from lnvesting Activities

Dividend received / lnteresl received 55.841.980
Paid for purchase of Securities
Purchase / Sale of Property, Piant and Equipment (23,466,091) (1r,439,719)
Purchase / Sale of Subsidiaries (34,895,000)
Net Cash Flow trom lnvesting Activlties (58,361,091) 44,402,261
C. Cash Flow from Financing Activities

Receipts trom lssue of Loan Capital & Debl Securities
lncrease/(Decrease) in Borrowing (1,057,047,865)
Received by lssue of Share 319,765.000
Dividend Paid (106,587,250) (83,055,000)
Net Cash Flow from Financing Activities 213,177,750 (1,140,102,855)
D. Net lncreas€/Decrease of Cash & Cash Equivalent (A+B+C) (145,384,792) 952,822,547

Etlect of Exchange Rate on Cash & Cash Equivalent
E. Opening Cash & Cash Equivalent 6,954,700,205 6,001,877,618
E Closing Cash & Cash Equivalent (D+E) 3'1 6,809,315,413 6,954,700,205
These linancial statements should be read in conjunction with the annexed noles
$ft"a q:*K
Director Oirector
-+.sd*
Direclor
ht'b
Managing Director
Auditors' Report to the Sharcholders, see annexed report of even date
t*sdrpar Ot s,ll,ut
Hoda Vasi Chowdhury
vvl C:t {o
,Co
0&4"^k
rllasem & co
Chanered Accountahfs Chartered Accountants
Dated, 30 l/arch 2004
Dhaka, Bangladesh
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46
Notes to the Financial statements iortheyearendecr 3r December,2003
1.0 Legal Status and Nature of the Company

l\,lercantile Bank Limited was incorporated in Bangladesh as a Public Limited Company with Limited
Liability
under Bank companies Act, 1991 as on May 20, 1999 and commenced commercial operation on June 2, 1999.
The Company went for Public issue of Shares on October 21, 2OO3 and its shares are listed with Dhaka Stock
Exchange and Chittagong Stock Exchange.
The commercial banking activities of the bank encompass a wide range of services including accepting
deposits, making loans, discounting bills, conductjng money transfer and loreign exchange transactions, and
performing other related services such as safe keeping, collections, issuing guarantees, acceptances
and
letters of credit.
2.O SignilicantAccountingPolicies
2.'1 Basis of Preparation ol Financial Statements

The financial statements of the Bank are prepared under historical cost convention and in accordance with
first
schedule of Bank companies Act, 1991 as amended on June 25, 2003, section 38(4), Bangladesh Bank
circulars, Bangladesh Accounting standards, companies Act 1994, the securities and Exchanges Rule 1987
and other laws and rules applicable in Bangladesh.
2.2 Consolidation of Branches

The Financial Statements oI the Bank represent consolidated statement of affairs and statement of profit and
loss of all branches. All significant inter branches transactions are eliminated on consolidation.
2.3 RevenueRecognition
The revenues during the year are recognized as follows which comply with all conditions ol revenue recognition
as provided in BAS 18 "Revenue Recognition',
i) lnterest is calculated on daily producl basis on unclassified loans and advances.
ii) lnterest is charged on classified loans and advances as per BRPD circular no- 16 of '199g and such interest
is not included into income and credited to interest suspense account.
iii) Commission and Discount on Bills Purchased and Discounted are recognized at the time of realization.
iv) lnterest on investments is accounted Ior on accrual basis of accounting.
v) Foreign currency transactions are translated into Taka at rates prevailing on the dates of such transactions
and exchange gains or losses arising out of the said transactions are recognized as income or expense
for lhe year and dealt with exchange account.
2.4 Valuation ol Assets

i) Fixed Assets
Fixed Assets are stated at cost less accumulated depreciation and depreciation thereon is charged
to
operating expenses.
ii) lnvestments
. Government Securities (Treasury bills) are stated at face value.
a lnveslment in shares has been shown at cost.
2.5 Depreciation
Depreciation is charged at the following rates on reducing balance method lrom the date oI acquisition, other
than the Vehicles on which straighHine method is applied.
Name of Assets Rate of Depreciation
Fixtures
Furniture and fiy" p.a.
Otfice Equipment 1So/. p.a.
Vehicles 2ook p.a.
Books 2Oy" p.a.
47
Notes to the Financial Statements
2.6 Taxation
As per lncome Tax Ordinance '1984, provision lor lncome Tax has been made at the rate of 457. as envisaged
in Finance Act 2003.
2.7 Foreign Currency Transactions

Transactions in foreign currencies were recorded at the rate ruling at the date ol such transactions. Assets and
liabilities outstanding as at 31 December 2OO3 denominated in foreign currencies are retranslated into Taka at
the rate ol exchange ruling on the Balance Sheet date as follows.
Currencv Name Exchange Rate (Taka)

US$ 58.45
Euro 73.O4
Yen 0.55
GBP 103.29
CAD 44.66
ACU 58.45
2.4 Loans and Advances

Loans and Advances were written otf to the extent where there is no realistic prospect of recovery. Specific
provisions were made to adjust all impaired loans and advances with their expected realizable value as per
BRPD Circular No'16 and 09 dated December 06, 1998 and May 14,2001 respectively at the following rates:
Particulars Rate
General provision on unclassified loans and advances 1'/.
Provision on substandard loans and advances 2O'/.
Provision on doubtful loans and advances 50'/"
Provision on bad & loss loans and advances 100%
2.9 Proposed oividend

Proposed dividend has been disclosed as a separate part oI shareholders equity as per BAS-1 "Presentation
ol financial statements" which is in line with BAS- 30 and format proposed by the Bangladesh Bank.
2.10 Earnings Per Share (EPS)

The Bank calculates Earnings Per Share (EPS) in accordance with BAS - 33 "Earnings Per Share" which has
been shown at Profit and Loss Account. This has been calculated by dividing the basic earnings with the
weighted average number of ordinary shares outstanding during the year.
2.11 Cash Flow Statement

Cash Flow statement is prepared in accordance with BAS - 7 "Cash Flow Statement" and the cash llow from
the operating activities has been presented under direct method as prescribed by the Bangladesh Bank.
Closing cash and cash equivalents consist of cash with Bangladesh Bank, with its agent bank(s) government
securities and deposits with other banks.
2.12 Contingent Liabilities, Commitments and other Off-Balance Sheet Settlement

Like other Banking Companies, the Bank conducts business involving acceptances, guarantees, performance
bonds and indemnities. Contingent liabilities, commitments and derivatives were not reflected in the Balance
Sheet.
2.13 General
i) Wherever considered necessary previous year's ligure have been rearranged for the purpose of
comparison;
ii) Figures appearing in lhese Financial Statements have been rounded off to the nearest Taka.
48
2003 2002
Taka Taka
3. CASH
A. Cash in hand
ln local currency 124,694,230 101 ,730,126
ln foreign currencies 4,290,475 3,177,171
128,984,705 104,907,297
B Balance with Bangladesh Bank
ln local currency 635,309,783 410,904,681
ln foreign currencies 41.530,043 31 ,217,653
676,839,826 442,122,334
805,824,531 547,029,631
Balance with Bangladesh Bank in local currency includes an amount of Tk 589,212,000 as a Statutory Deposits as
at 31 December 2003
4. BALANCE WITH OTHER BANKS AND FINANCIAL INSTITUTIONS
A. lnside Bangladesh
Current Accounts
Sonali Bank 5,375,678 2,055,'137
Agrani Bank 13,37'1 18,948
5,389,049 2,O74,O85
Short Term Deposits
National Bank Lld. 11.145,441 9,935,'197
Arab Banqladesh Bank Ltd 608,257 307,779
NCC Bank Ltd. 281 ,0'18 280,565
Dutch Bangla Bank Ltd. 500,000,000
Southeast Bank Ltd. 6,079,401 2,336,572
518,114,1'17 '1
2 ,860, '1 '1
3
Fixed Deposits (Note-4.l)
ONE Bank Ltd. 100,000,000 700,000,000
Eastern Bank Ltd. 1,100,000,000
AB Bank Ltd. 350,000,000 150,000,000
Standard Bank Ltd. 150,000.000 50,000,000
Social lnvestment Bank Ltd. 200,000,000 400,000,000
The Oriental Bank Ltd. 100,000,000
Jamuna Bank Ltd. 100,000,000 50,000,000
The City Bank Ltd. 100,000.000 800,000,000
First Security Bank Ltd. 300,000.000 300,000.000
Citibank. N.A. Dhaka 80,000,000
Bank Asia Ltd 200,000,000
The Trust Bank Ltd 200,000,000
lnvestment Corporation of Bangladesh (l C B) 250,000.000
lndustrial Promotion & Development Co. of Bangatdesh Ltd 200,000,000
2,150,000,000 3,730,000,000
Balance Carried Forward 2,673,503,r66 3,744,934,198

49
2003 2002
Taka Taka
Balance Brought Forward-lnside Bangladesh 2,673,503,166 3,7 44,934,194
B. Outside Bangladesh Currencv Amount Hate
Standard Chartered Bank, New York USD 8,084.55 58.45 472,542 8,026,006
'l,641,167
American Express Bank, New York USD 2,493.64 58.45 145,753
l\,lashreqBank, New York USD 2,526.83 58.45 147,693 2,767,515
Citibank N.A., New York USD 3,253.34 58.4s 190,158
HSBC, New York USD 10,215.92 58.45 597,121 998,337
Wachovia Bank. N.A. New York USD 34,377.81 58.45 2,243,183 3,468,515
Standard Chartered Bank, London GBP 103.29 2,296,987
The Bank of Tokyo Mitsubishi Ltd.Tokyo YEN 5,467,146.00 3,021,145 1 ,651 ,237
Citibank N.A., Mumbai ACU 12,696.37 58.45 7 42,103 363,734

Rupali Bank Ltd., Karachi ACU 290.23 58.4s 16,964 778
Commerzbank, Frankfurt EUFIO 73,544.48 73.O4 5,371,895 544,167
American Express Bank, Frankfurt EURO 5,832.55 73.O4 426,026
Unicredito ltaliano. l\4ilan EURO I 170 00 73.04 305,318 325,156
Hatton National Bank, Colombo ACU 3,767.95 58.45 220,237 1,418
United Bank of lndia, Kolkata ACU 22,732.43 58.45 1324,71O 215,859
American Express Bank Ltd. Kolkata ACU 5,50'1.26 58.45 321,549
Toronto Dominion Bank, Toronto CAD 7,853.79 44.66 350,774
Arab Bangladesh Bank Ltd., Mumbai. ACU 39,750.00 2,323,388
Standard Chartered Bank, Kolkata ACU 2,201.21 128,66't
HSBC, Mumbai ACU 21,445.6s 58.45 1 ,253,497
Nepal BD Bank Ltd., Kathmandu ACU 32.00 58.45 1,870 146,500

1 9,6'17,81 6 22,447,376
2,693,120,982 3,767,38-t,574
4.1 Fixed Deposits- Maturity-wise Groupings(lnside Bangladesh)

Payable on Demand
Up to 3 (Three) Months 1,950,000,000 3,730,000,000
From 3 (Three) lvlonths to 1 (One) Year 200,000,000
From '1 (One) Year to 5 (Five) Years
Above 5 (Five) years
2,150,000,000 3,730,000,000
5 MONEY AT CALL AND SHORT NOTICE

Citibank N.A., Dhaka 120,000,000
lndustrial Promotion and Development Co of Bangladesh Ltd 150,000,000 2s0,000,000
United Leasing Company Ltd. 90,000,000
Bank Asia Ltd. 60,000,000
Delta Brac Housing Ltd. 80,000,000 110,000,000
Brac Bank Ltd. 80,000,000 40,000,000
Standard Bank Ltd. 50,000,000 570,000,000
EXIM Bank Ltd. 100,000,000
lnternational Leasing and Financial Services Ltd. 110,000,000
Eastern Bank Ltd. 10,000,000
First Security Bank Ltd. '130,000,000
Jamuna Bank Ltd. 50,000,000
National Credit and Commerce Bank Ltd. 30,000,000
Dhaka Bank Ltd. 100,000,000
Commercial Bank of Ceylon 70,000,000
AMEX Bank Ltd. 100,000,000
The Trust Bank Ltd. 200,000,000
.1,260,000,000
1,240,000,000
50
2003 2002
6. INVESTMENTS Taka Taka
Government Securities (Note-6.1 )
Treasury Bills (at face value) 2,020,000,000 1,330,000,000
T & T Bonds 50,000,000 50,000,000
Prize Bonds 369,900 289,000
2,070,369,900 1,380,289,000
Other lnvestments (Note- 6.3) 36,895,000 2,000,000
2,107,264,900 1,382,289,000
6.1 Maturity Grouping of lnvestments-Government Securities

Payable on Demand 369.900 289,000
Up to 3 (Three) Months 50,000,000
From 3 (Three) lvlonths to'l (One) Year 300,000,000 810,000,000
From '1 (One) Year to 5 (Five) Years 1,720,000,000 570,000,000
More than 5 (Five) Years
2,070,369,900 1,380,289,000
6.2 lnvestment-GovernmentSecurities
28 days Treasury Bills
91 days Treasury Bills 50,000,000
82 days Treasury Bills
'1
150,000,000
364 days Treasury Bills '150,000,000 810,000,000
2 years Treasury Bills 590,000,000 90,000,000
5 years Treasury Bills 1,080,000,000 430,000,000
3YearsT&TBonds 50,000,000 50,000,000
2,070,000,000 1,380,000,000
6.3 Other lnvestments Nature of

Investment
Central Depository Bangladesh Ltd. Share 2,000,000 2,000,000
Standard Bank Ltd. Share 3,540,000
ONE Bank Ltd. Share 1,350,000
Bank Asia Ltd. Share 805,000
Datfodil Computers Ltd. Share 200,000
DBBL lndustrial Bond Bond 29,000,000
36,895,000
___3400400
6.4 Other lnvestment- in shares o nquoted
Central Depository Bangladesh Ltd Primary Share 2,000,000 2,000,000
Standard Bank Ltd. Primary Share 3,540,000
ONE Bank Ltd. Primary Share 1,350,000
Bank Asia Ltd. Primary Share 805,000
Daffodil Computers Ltd. Primary Share 200,000
7,895,000 2,000,000
7 LOANS AND ADVANCES

Loans, Cash Credit and Overdraft, etc. (Note- A) 10,303,'124,096 8,293,919,325
Bills Purchased and Discounted (Note- B) 472,821,435 602,273,788
10,775,945,531 8,896,193,113
5t
2003 2002
A Loans, Cash Credit and Overdraft, etc Taka Taka
Loan General 1,488,418,882 819,333,969

Loan Against Trust Beceipt 1,953,529,552 1,644,308,206
Packing Credit 220A87 ,135 239,701,24O
Lease Finance '131 1654'13781
,399,863
Hire Purchase 1 ,310,409,868 975,549,474
Payment Against Documents 293,266,287 222,s63,656
Cash Credit (Hypo) 1,669,482,337 1 ,304 ,404 ,947
Overdratt 2,560,515,897 2,260,451,794
Consumers Credit '169,983,183 174,832,2-13
House Building Loan 264,880,686 34,287,O30
Staff Loan 63,762,979 52,466,219
EDF Loan 102,910,883 340,584,718
Other Credit Schemes 73,481,680 56,022,038
Credit Card 594.864
10,303,124,096 8,293,919,325
Bills Purchased and Discounted

Payable in Bangladesh 30,677,646 23,496,258
Payable Outside Bangladesh 442,143,789 574,777,530
472,421,435 602,273,788
B-'t Maturity Grouping

Payable within '1 (One) month
Over '1 (One) month but less than 3 (Three) months 442,t43,789 57A,777,530
Over 3 (Three) months but less than 6 (Six) months 30,677,646 23,496,254
6 (Six) months and above
472,82-1,435 602,273,744
7.-l Maturity Grouping of Loans & Advances

Payable On Demand 293,266,286 222,563,654
Not more than 3 (Three) months 1,540,372,616 'l,090,470,285
More than 3 (Three) months but nol more than '1 (One) year 5,606,997,900 5,451,505,955
More than 1 (One) year but not more than 5 (Five) years 2,163,708,729 2,079,147,OOO
More than 5 (Five) Years (lncluding Statf Loan) 1,17'1,600,000 52,466,219
10,775,945,s31 8,896,193,113
7.2 Loans and Advances Classitied into the Following Broad Categories
ln Bangladesh 10,333,801,742 8,317,415,583
Loans 6,103,803,508 4,752,558,842

Cash Credits 1,669,482,337 1 ,304 ,404 ,947
Overdraft 2,560,515,897 2,260,451,794
Outside Bangladesh 442,143,789 57A,777.530
10,775,945,531 8,896,193,113
52
2003 2002
7.3 An Analysis to Disclose the Following Signiticant Concentration Iata Taka
Advances to Directors and Others
Advances to Managing Director and Chief Executive
Advances to Customers Group 7,'1'16,458,531 5,755,355,584
lndustry-wise 3,659,487.000 3,140,837,529
Geographical Location-wise
10,775,945,531 8,896,193,113
Loans and Advances allovyed to each customer exceeding 15% of Bank's total capital:
Total Loans and Advances Tk.3,773,000,000
No. of Customers 23
Classified amount thereon Nil
lvleasures taken for recovery Not Applicable
The amount represents the sum ol total loan allowed to each customer exceeding
Tk. 11 .85 crore which is computed @ '15% of closing total Capital Fund.
7.4 Loans & Advances Classitied as per Bangladesh Bank Circular

Unclassified 10,331 ,923,531 8,858,705,703
Sub-standard 186,981,000 24,3'15,068
Doubtful 209,898,000 7,410,038
Bad & Loss 47,143,OOO 5,762,304
10,775,94s,s31 8,896,193,113
7.5 Nature wise Loans & Advances

Continuous 3,914,305,531 3,308,858,500
Demand Loan 3,526,330,000 3,455,681,394
Term Loans up to 5 (Five) Years 2,163,710,000 2,079,187,000
Term Loans above 5 (Five) Years (lncluding Statf Loan) 't
,171 ,600,000 52,466,219
10,775,945,531 8,896,193,113
7.6 Particulars of Loans and Advances

i) Loans considered good in respect of which the Bank
Company is fully secured 9,700,227,651 7,457,998,930
ii) Loans consadered good for which the bank holds no other
Security than the debtors personal security 244,906,000 '100,004,850
iii) Loans considered good and secured by the personal security

ol one or more parties in addition to the personal security
of the debtors 830,81'1,880 1,338,189,333
iv) Loans adversely classilied; pro'./ision not

maintained there against
10,775,945,531 8,896,193,113
v) Loans due by Directors or Executives ot the banking

company or any of them taken either severally or jointly
with any other person 63,762,979 52,466,219
53
2003 2002
Taka Taka
vD Loans due by companies or firms in which the Directors of
the bank company are interested as Directors, partners or
Managing Agents or in case of private companies, as members
viD Maximum total amount of advances, including temporary

advances made at any time during the year to Directors
or Managers or Otficers of the banking company or any of
them either separately or jointly with any other person 63,762,979 52,466,2'19
viii) Nilaximum total amount of advances, including temporary

advances granted during the year to the companies or firms
in which the directors of the banking company are interested
as directors, partners or managing agents or in the case ol
private companaes. as members
ix) Due from other banking companies
x) Total amount of classified advances on which interest is

not credited to income 444,O22,OOO 37,487,000
a. lvlovement of classified Loans and Advances

Opening balance 37,447,410 5,162,996
lncrease/ Decrease during the year 406,534,590 32,324,414
444,O22,OOO 37.487,410
b Amount oI provision kept against loan classilied as

'bad & loss' on the reporting date of balance sheet 20,527.OOO 2,759,000
't
c lnterest creditable to the lnterest Suspense Account 61,177,728 ,872,737
xi) Amounl of written ofi loan:

Cumulative amount
Amount written otl during the year
8. FIXED ASSETS INCLUDING PREMISES, FUBNITUBE AND FIXTURES -

at cost less accumulated depreciation (Annexure-A)
Furnilure & Fixtures 40,806.499 31,428,5s5
Office Equipment 36,703,209 32,762,404
Vehicles 3,427,902 5,239,882
Books 164,427 1'15,405
81,502,437 69,546,250
o OTHER ASSETS
Advance Deposits 448.750 430,750
Stock oI Stationery 5,380,692 6,070,022
Suspense Account 4,855,079 3,623,845
Stamps in hand 1,s31,866 157 ,476
Advance Rent 34,380,045 33,923,445
D.D. paid without advice 70,000
Adjusting Account Debit (Note 9.1) 14A,427,230 72,264,299
Advance lncome Tax 425,978,OO2 344,256,470
621,O7'l ,664 460,726,707
54
2003 2002
Taka Taka
9.1 Adjusting Account Debit
Accrued interest 145,940,O44 68,719,936
Fees and commissions 1,449,623 1,100,000
Other accruals '1,037,563 2,444,363
148,427,230 72,264,299
10. BORROWINGS FBOM OTHER BANKS, FINANCIAL INSTITUTIONS AND AGENTS

lnside Bangladesh
United Commercial Bank Ltd 250,000,000
First Security Bank Ltd. 70,000,000
Mutual Trust Bank Ltd. 50,000,000
Prime Bank Limited 20,000,000
The Premier Bank Ltd. 80,000,000 140,000,000
Dhaka Bank Ltd. 50,000,000
The City Bank Ltd. 100,000,000 100,000,000
Dutch Bangla Bank Ltd. 50,000,000 200,000,000
Jamuna Bank Ltd. 600,000,000
Agrani Bank 150,000,000
Sonali Bank 50,000,000 150,000,000
AB Bank Ltd. 50,000,000
Uttara Bank Ltd. 200,000,000
800,000,000 1,510,000,000
Outside Bangladesh
Citibank NA. New York 14,218,233
Ameracan Express Bank Ltd., Kolkata 4,375,145
American Express Bank, Frankfurt 660,'159
Toronto Dominion Bank, Toronto 634,287
19,887.A24
800,000,000 1,529,887,824
A. Security wise grouping

Secured Borrowing 800,000,000 1,510,000,000
Unsecured Borrowing
800,000.000 1,510,000,000
B Repayment nature wise grouping

Repayable on demand 800,000,000 1,510,000,000
Others
800,000,000't,510,000,000
11. DEPOSITS AND OTHEB ACCOUNTS

A Deposits Received lrom Banks ( Note- A-1) '1,000,000,000 3,650,000,000
B Other than Bank 13,798,596.s08 9,501,949,316

Payable on Demand ( Note- B-1) 1,680,445,'180 1,255,606,113
Other Deposits ( Note - B-2) 12,'118,15'1 ,328 I,246,343,203
14.798.596,508 13,15'1,949,316
2003 2002
TaXa Taka
C. Maturity Analysis
Repayable on Demand 1,636,573,647 1 ,272,437,113
Repayable within 1 (One) Month 1.715.363,802 2,821,354,440
Repayable over 1 (One) Month but within 6 (Six) iilonths 2,a72,728,479 2,919,375,204
Repayable over 6 (Six) N.4onths but within 'l (One) Year 1,722,853,943 1,699,674,133
Repayable over 1 (One) Year but within 5 (Five) Years 4,347,355,557 2,877,473,464
Repayable over 5 (Five) Years but within 10 (Ten) Years 2,503,721,080 1,56'1,634,962
Unclaimed Deposits'10 (Ten) years and over
14,798.s96,508 13,151,949.316
A.1 Deposits received ,rom Banks

Social lnvestment Bank Ltd. 500,000,000
Eastern Bank Ltd. 900,000,000
First Security Bank Ltd. 100,000,000
National Bank Ltd. 100,000,000 350,000,000
Dutch Bangla Bank Ltd 500,000,000
The Premier Bank Ltd. 150,000,000
Pubali Bank Ltd. 50,000,000
Mutual Trust Bank Ltd. 100,000,000
ONE Bank Ltd. 200,000,000 700,000,000
The City Bank Ltd. 100,000,000 900,000,000
1,000,000,000 3,650,000,000
B-l Payable on Demand
Current Deposits 494,624,665 324,304,265

Savings Deposits('1 0%) 78,946,759 54,152,741
Foreign Currency Deposits (Non-lnterest Bearing ) 43,477,928 22,125,643
Security Deposit Receipt 89,875,816 62,292,791
Sundry Deposits 469,076,340 449,287,505
Foreign Currency held against Back to Back UC 504,O43,672 343,443,168
1,680,445,180 1,255,606,113
B- 2 Olher Deposits
Savings Deposit (90%) 710,520,833 487,374,672
Fixed Deposits 4,314,266,247 2,742,778,755
Short Term Deposits 426,144,441 363,864,87'1
Bills Payable (Note-11.2) 324,332,420 397,893,847
Bearer Certificates of Deposit (Note-11 .5) 28,635,943 112,491,434
Deposits Under Schemes (Note-1'l .6) 6,306,938,390 4,124,458,437
Foreign Currency Deposits (lnterest Bearing ) 6,477,146 16,831 ,000
Non-Resident Taka Deposit 33,213 777
Deposit Under Q-Cash 801,855 249,O10
'12,118,151,328 8,246,343,203
56
2003 2002
1l.l Current Accounts and other Accounts Ta ka Taka
Current Deposits 494,624,665 324,304,265
Shorl Term Deposits 426,144,Aal 363,864,871
Non-Resident Taka Deposits 33,213 777
Foreign Currency Deposits 50,355,074 38,956,643
Deposit Under Q-Cash 801,855
Security Deposit Receipt 89,875,816 62,292,791
Sundry Deposit 469,076,340 449,287,504
Foreign Currency Held Against Back to Back UC 504,O43,672 343,443,'168
2,034,955,516 1,582,150,019
11.2 Bills Payable
Foreign D.D
Pay Slip 2,341,809 560,738
Travelers Cheques 402,470
Pay Order 301,541,288 389,994,974
Demand Draft 20,449,723 6,935,265
324,332,820 397,893,847
11.3 Savings Bank Deposits

As per BRPD Circular No. 03 dated July 07 '1997, total saving bank deposits amount is bilurcated into
10'l" of total Savings Bank Deposits 78,946,759 54,177,642

90% of total Savings Bank Deposits 710,520,833 447,598,742
789,467,592 541,776,424
11.4 Fixed Deposits - Maturity wise Grouping

Repayable within 1 (One) Month 253,530,200 1,571 ,971 ,263
Over 1 (One) Month but within 6 (Six) Nilonths 2,822,379,800 2,919.375,204
Over 6 (Six) Months but wilhin 1 (One) Year 1,694,218,000 1 ,587,182299
Over '1 (One) Year but within 5 (Five) Years 544,-t38,247 314,249,989
Over 5 (Five) Years but within 10 (Ten) Years
Unclaimed Deposits for '10 (Ten) Years and above
5,314,266,247 6,392,774,755
11.5 Bearer Certiticates ot Oeposit
Repayable within 1 (One) Month

Over 1 (One) l\,lonth but within 6 (Six) Months
Over 6 (Six) Months but within 1 (One) Year 28,635,943 112,491 ,834
Over 1 (One) Year but within 5 (Five) Years
Over 5 (Five) Years but within 10 (Ten) Years
Unclaimed Deposits for '10 (Ten) Years and above
28,635,943 112,491,834
Bearer Certilicates of Deposit discontinued for New Accounts Holders

57
2003 2002
11.6 Deposits Under Schemes Taka Ista
Monthly Savings Scheme 'r,357,633,037 680,938,860
Double Benefit Deposit Scheme 2.601.403.007 '1,684,098,231
lvlonthly Benefit Scheme 1,9'tO,751 ,779 1 ,518,819,900

't
Aqrim Sanchaya Prakalpa 2,065,267 ,918,615
Special Savings Scheme 401,541,000 222,960,775
Ajibon Pension Scheme 33,544,300 16,122,056
6,306,938,390 4,124,458,437
12, OTHEB LIABILITIES

Provision for Mercantile Bank Foundation 6,064,000 4,800,000
Provision lor lncentive Bonus 25,000,000 '14,909,793
Provision lor Taxation (Note '12.1) 525,000,000 401,793,044
Provision for Loans and Advances (Note-12.2) 248,438,819 100,438,819
Adjusting Account Credit 619,125,970 290,173,957
lnterest Suspense Account (Note-1 2.3) 61,177,728
Foreign Currency held against EDF UC 67,466,121 178,408,366
Exchange Equalisation Account 2,322,375 2,324,375
Mercantile General Account 41,768,193 5,928,366
Proposed Cash Dividend 106,587,250
1,596,363,206 1,107,236,706
12.1 Provision for Taxation

Provision held at the beginning of the year 401,793,044 229,293,O44
Add: Provision made durang the year ( Note- 12.1.1) 211 ,411 '172,500,000
,315
613,204,359 401 ,793,044
Less: Adjustment made during the year 88,204,359
Balance held at the end of the year 525,000,000 40'l,793,044
Provision made during the year includes an amount of Tk 18,911,315 representing a shorl provision relating to
accounting years ended 31 December 1999 and 2000 respectively. 1% provision on unclassified advances was
allowed by Tax Authority for the year 200'1. The Bank intends to approach to Tax Authority this year also.
12.1.1 Provision made during the year

Gross Prolit 606,388,216 480,555,604
Less :
1% Provision against Good advances 15,000,000 2'1,200.000
Provision for Classilied Advances 133,000,000 11 ,000,000
Contribution to l\,lercantile Bank Foundation 6,064,000 4,800,000
lncentive Bonus 2s,000,000 1 4.514,400
179,064,000 51,514,400
Taxable Profit 427,324,216 429,041,204
lncome Tax thereon @ 45% (in 2OO2.4O"/") 192,295,897 171,616,4A2
Provision during the year 192,500,000 172,500,000

Add: Short Provision relating previous year 18,911,315
211,411,315 172,500,000
s8
2003 2002
12.2 Provision for Loans and Advances Taka Taka
Specific Provision for Classified Loans & Advances 145,300,000 '12,300,000
General Provision ('l% for Unclassified Loans & Advances) 103,138,819 88,138,819
248,438,819 '100,438,819
Movement in Specilic Provision

Provision held at the beginning oI the year 12,300,000 1,300,000
Fully provided Debts written otf
Recoveries ol amounts previously written off
Specific Provision for the year
Recoveries and Provisions no longer required
Net Charge to Prolit and Loss Account 133,000,000 '1'1
,000,000
Provision held at the end ol the year 145,300,000 12,300.000
General Provision (1% lor unclassified Loans & Advances)

Provision held at the beginning of the year 88,138,819 66,938,819
Addition during the year 15,000,000 21,200,000
'103,138,819 88,138,819
Provision at the End of the Year 248,438,8'r 9 '100,438,819
12.3 lnterest Suspense Account

Opening Balance as at 01 January 2003 1 ,872,736 262.229
Add: Transferred during the year 59,304,992 1,792,000
61,177,728 2,O54,229
Less: Flecovery of the Suspended lnterest during the year 18'1,493
61 ,177,72A 1,872,736
13. CAPITAL
AUTHORISED CAPITAL
12,000,000 ordinary shares of Taka 100 each 1,200,000,000 1,200,000,000
'13.1 lssued, Subscribed and Fully Paid-up Capital
Total 6,395,300 (in 2002: 3,'197,650) Ordinary shares ol Tk 100 each were issued, subscribed and fully paid-
up al the end of 31 December 2003. Out of these 5,647,650 shares were issued lor cash and the rest i.e.
747.650 shares were issued other than cash as bonus shares. Details are as lollows:
lssued for Cash 564,765,000 245,000,000

lssued for other than Cash - Bonus Share 74.765,000 74,765.000
539,530,000 319,765,000
59
13.1.1 Particulars of Fully Paid-up Share Capital as at 31 Decembel 2003 are as follows:
Number ol Percentage 2003 2002
Shares (Y") Taka Taka
Sponsor Shareholders 3,197,650 50.00 319,765,000 319,765,000

Pre - IPO Placement :
Local lnstitutional/lndividual 1,065,750 16.66 106,575,000
Public lssue:
General Public 2,131,900 33.34 213,190,000
6,395,300 100.00 639,s30,000 319,765,000
13.1.2 Classitication ol Shareholders by Holding as at 31 December 2003

Holding No. of No. ol o/o
ol Total
shareholders Shares Shares
'1'1.97
Less than 5.000 Shares 2,986 765,750
5,00'l to 10,000 Shares 32 246,950 3.86
'10,00'l to 20,000 Shares 495,900 7.75
20,001 to 30,000 Shares 10 237,850
'l'l 378,316 5.92
30,001 to 40,000 Shares
40,001 to 50,000 Shares I 407,800 6.38
50,00'l to '1,00,000 Shares 20 1 ,419,342 22.19
1,00,001 to 10,00,000 Shares 15 2,443,392 3a.21
3,118 6,395,300 100.00
2003 2002
13.2 Share Premium Account Taka Taka
Opening Balance as at January 01, 2003 31.197.347 16,724,847
Add: Addition during the Year 14,468,500
31,'197,347 31 ,197 ,347
Less: Transfered to retained earnings 3'1,197,347
31,197,347
13.3 Capital Adequacy Ratio

There remains a surplus of Tk.'174.30 million on capital and reserve fund of the bank as per requirement o1
section 13A ol Bank Companies Act, '1991 and BRPD Circular No 10 dated 25, November 2002 respectively
details of which are placed below:
Tier-l (Core Capital)
Paid-up Capital 639,530,000 319,765,000
Share Premium 31 ,197,347
Statutory Reserve 281,032,622 195,532,622
Proposed Bonus Share 159,882,500
Dividend Equalisation Fund 45,680,250 45,680,250
Retained Earnings 3,644,959 1,917,210
't,129,770,331 594,O92,429
Tier-ll (Supplementartl!:api!al)
o/o 103,138,819 88,138,819
'1
General Provision
Exchange Equalisation Account 2,322,375 2,324,375
'105,461 90,463,194
,194
A. Total Capital 1,235,231,525 684,555,623
B. Total Flisk Weighted Assets 11,788,092,000 8,437,548,000
C. Required Capital based on Risk Weighted Assets(g%on B) '1,060,928,280 675,003,840
D. Surplus (A - C) 174.303,245 9,551,783
Capital Adequacy Ratio 10-48/" 8.117"

60
Capital Requirement 2003 2002

Required Held Bequired Held
Tier - | 4.50"/" 9.58% 4 AO% 7.O4"k
Tier - ll 0.90% 1 .O70/o
Total 9.00% 10.480/" 8.00% 8.11"k
2003 2002
14. STATUTORY RESEBVE TaIa faka
Opening Balance, as at 01 January, 2OO3 195,532,622 109,647,O22
Transferred during the year from Prolit & Loss A/C 85,500,000 85,885,600
Closing Balance 281,032,622 195,532,622
This has been done according lo Sec. 24 of Bank Companies Act,199'land shall be maintained until it equals
to Paid-up Capital.
15 OTHER RESERVES
Balance as per Last Account 45,680,250
Add; Addition During the Year (Dividend Equatization Fund) 45,680,250
45,680,250 45,680,250
16. Surplus in Profit & Loss Account

Total Profit before lncome Tax 427,324,217 429,041,204
Less: Statutory Reserve 85,500,000 85,885,600
341,824,217 343,155,604
Less; Provision lor lncome Tax 2'1 '1
,4'1
'1
,31 5 172,500,000
Net Profil after lncome Tax lor the year 130,412,902 170,655,604
Add: Brought lorward lrom previous years' balance 33,'t.14,557 13,227,606
Retained Earnings 1 ,917,210 13,227,606
Bonus Share Premium 31 .197,347
Total available lor distribution 163,527,459 183,883,210
Less: Appropriation '159,882,500 181 ,966,000
Cash Dividend '106,587,250

Proposed Bonus Share 159,882,500 '15,230,000
Bonus Share Premium '14,468,500
Dividend Equalisation Fund 45,680,250
3,644,9s9 1,917,21O
The Board ol Directors ol the Bank has proposed and recommended Bonus share @ zs.k ot paid-up capital
(Tk.639,530,000 ) ,subject to the approval of Securities and Exchange Commission and Bangladesh Bank.
17. LETTER OF GUARANTEES

l\,loney for which the Bank is contingently liable in respect of guarantees are given favoring
Directors
Government
Banks and other Financial lnstitutions -
Others 697,7A5,462 461 ,746,914
697,785,462 461,786,914
61
2003 2002
18. INTEREST INCOME Taka Taka
lnterest received from Banks & other
Financial lnstitutions 225,759,569 204,061 ,573
lnterest received from F.C. Clearing Account 1 ,426,370 2,769,929
lnterest received from ATIV card 1'1 .006
lnterest received Irom Loans and Advances 1 ,220,914,462 1 ,0'18,520,529
1,448,115,807 1,225,352,031
19. INTEREST PAID ON DEPOSITS & BORROWINGS ETC.

lnlerest paid on Deposits 1,113,572,871 916,163,061
lnterest paid on Borrowings 2,212,244 2,0s0,000
lnterest paid on Refinance of Bangladesh Bank 4,878,995
lnterest paid on Overseas Accounts 30,s62 18,447
1,115,815,677 923,110,543
20. COMMISSION, EXCHANGE & BROKERAGE

Commission 151 ,913,099 117,606,909
Exchange 194,54'1 .935 144,409,284
346,455,034 262,0'16,193
21 OTHEB OPERATING INCOME

Services & other Charges 13,100,145 9,902,025
lncome from Rent of Locker 173,000 115,000
Telex/Telephone/E-mail Charges 10,793,500 '16,422,797
On Line Client Fee 371 s32 70,900
ATM Card 19,279
lvliscellaneous Earnings 30,137,473 22,584,O98
54,59s,329 49,094,820
22. DIRECTORS'FEES Rate No. ol No. ot

meetings parlic ioants
Directors'Fees 2500 89 829 2,O72,500 1 ,707,500
Directors' Fees VAT 285,375 257,250
Other Benefil
2,357,875 1,964,750
23 SALARIES & ALLOWANCES

Basic Salary 48,664,411 35,210,608
Bonus 31,821,313 19,34'1,350
Bank's Contribution to Staff Provident Fund 4,069,969 3,158,744
House Flent 25,067,504 19,661 ,849
Conveyance Allowance 3,796,806 2,882,757
Exgratia 420,500 293,000
Car Allowance 10,361,472 7,003,304
Entertainment Allowance 2.117,737 1,248,984
Medical Allowance 5,802,'156 4,15-t,O74
Utility Services 7,76'1,68s 5,003,086
House lvlaintenance Allowance 7,755,708 5,041,786
Overtime Allowance 171,252 156,200
Other Allowances 178,393 182,427
147,988,906 103,335,569
62
2003 2002
24. RENT, TAXES, INSUBANCE, LIGHTING ETC. Taka Taka
Rent 23,986,920 21,053,724

Rates, Taxes & Excise Duty 41,239 108,954
lnsurance 1'1,017,865 8,239,598
Lighting, Gas & WASA 6,405,856 5,321 ,166
41 ,451,880 34,723,442
25. LEGAL EXPENSES
Legal Fees & Charges 532,20s 404,940

Stamps & Notary Public Expenses 36,885 23,168
569,090 42A,10A
26. STATIONERY PRINTING AND ADVERTISEMENT
Printing & Stationery 6,582,287 3,801,999

Advertisement 9,769,836 10,568.734
Computer Expenses 2,178,734 1,829,414
18,530,857 16,200,147
,'1 DEPRECIATION AND REPAIRS OF FIXED ASSETS
Deprecialion on Fixed Assets (Annexure - A) 11,509,905 9,650,061

Repairs & Maintenance 3,478,936 2,984,'1'16
14,988,841 12,634,177
28. OTHEB EXPENSES
Bank Charges 601,483 2,721 ,739

Donation '1,123,000 599,000
Car Expenses 1,415,825 1,192,544
Discount & Commission Paid 34,698 49,414
Training Expenses 1,470,055 857,O27
IPO Expenses (Note- 28.1) 24,696,302
Securities & Cleaning 8,368,887 5,583,877
Subscription 1,242,906 638,701
Entertainment Expenses 4,767,234 2,417,272
Travelling Expenses 2,207,O30 't,432,0'17
Conveyance, Carriage & Freight 915,793 644,837

Business Development 634,207 '1
,917,910
Liveries & Uniforms 142,314 142,368
Medical Expenses 323,OO7 263,479
Newspapers 292,046 261,622
ATlvl Cards '1,705,798 7,452
lvliscellaneous 1 ,540,158 1,274,341
Contribution to Mercantile Bank Foundation 6,064,000 4,800,000
57,584,743 24,803,640
63
28.1 IPO Expenses
As per Bank Companies Act 199'1 , Section 19 relating to Public lssue, IPO expenses must not exceed 2.5y" of
the total public issue (Tk 31,97,65,000). But, due to overwhelming public support subscription collected through
differenl bankers to the issue was almost 40 times (Tk. 7,800 million) more than the otfering. Therelore, only
legislative Bankers to the issue (0.25% ol the amount received by each bank) commission exceeds 2.570
amount of the total public issue. However , public subscription generated more income than expenditure belore
finally relunded to the unsuccessful and partially successful applicants. As such the income has otf-set the lpO
expenditure in comparison.
29 Audit Committee
A Particulars oI Audit Committee

The Bank has constituted an Audit Committee ol the Board ol Directors with a view to acting as a bridge among
the Board ol Directors, Executive Authority, Depositors, Shareholders etc. so that the Committee can make an
effective role in establishing an etficient, strong and secured banking system. The Audit Committee has been
Iormed comprising 3 (three) members of the Board ol Directors as lollows :
Name Designation Educational Oualif ication

Ni1d. Anwaru Haque Chairman B. Sc. Engineering(Civil)
Dr. Toufique Rahman Chowdhury Member BA (Hons), MA in Economics, Postgraduate Diploma

in Management, DAIBB from lnstitute of Bankers'
Bangladesh, Ph.D. in Economics USA
N,1d. Selim l\,lember B,A.
B Meeting held with Audit committee and senior Management to consider and review the Bank's
Financial Statements:
'12 meetings of the Audit Committee were held at the Bank during the year 2OO3 to discuss/ review
the
Financial Stalements and other audit findings.
c The tollowing steps have been taken for implementation ol an effective lnternal Control Procedure of
the Bank :
- A strong division of the Bank has been formed for lnternalAudit with a view to establish compliance culture
and full conlrol on the exertion of the Bank Employees.
- Regular monitoring has been done lor the effectiveness ol the quality control policies and procedures with
the effect to evaluate the application of lnternal Control Syslem, lnternal Audit Policy, Policy for Financial
Risk, existing rules and regulations (internal and e)ternal), other obligations from controlling Authority,
disclosure process of Financial Statements of the Bank.
- To establish Planning, Organizing and Supervising culture and monitoring ol Audit and lnspection of the
Branches and ditferenl divisions ol Head Otfice and surprise inspection ol the Branches.
- Flegular review of the lnternal and External(including Bangladesh Bank) Audit Report with a view to
implement the suggestion ot lnternal and External Auditors in respect ol lnternal Control techniques and
structure.
- Review the Accounting procedure with a view to ascertain that the lnternational Financial Reporting
Standard (IFRS) has been applied in maintaining books and records of the Bank.
64
30 DETAILS OF OIRECTORS
sr. Name of the Directors Engaged entities Number of Share

No holding position
2003 2002
1 N4d.Abdul Jalil M/S Jalil Traders 63,001 63,001

Chairman Foyez Uddin Cold Storage Ltd
2 l\,4d. Anwarul Haque Techno Foki (Bd) Ltd. 96,759 96,759

Holiday Travels Lld.
Technocon Limited
Manar Associates Ltd
Living Plus Ltd.
Global lnsurance Lld.
3 Dr. Toulique Rahman Chowdhury lnstitute ol Business & lnformalion Technology 65,258 65,258
Metropolitan Universily
Metropolitan Education Promoters Ltd.
Sylhet Grammar School
Multisec Limited
Global Link Limited
4 Golam Faruk Ahmed M/s Ahmeds 130.516 130,516

Peoples lnsurance Co. Ltd.
Popular Life lnsurance Co. Ltd.
5 Al-haj S.M. Shakil Akhtar Sydney Fashions Ltd. 105,001 105,001

Ehsan Sweater Ltd.
Ehsan Fashions Ltd.
Ehsan Cement lndustries Ltd.
Ehsan Enterprise
M/s S.M. ShakilAkhtar
6 Engr. Mohd. Monsuruzzaman M/s. I\,4d. Monsuruzzaman 65,258 65,258

lnstitute of Business & lnlormation Technology
Metropolitan University
lvletropolitan Educalion Promolers Ltd.
Shomobai Bricks, Moulvibazar
The Barakah General Hospital Ltd, Dhaka
7 Al-haj Tara N4eah Khan Business in England 130,516 130,516
8 Subrota Narayan Roy New Sylhet Shananda Jewellers 130,516 130.516

Sony Medico
Shananda Trading
Shananda Jewelers
I Jamshed R. Khan Business in the USA 97,847 97,847
10 Md. Tabibul Huq Crealive Engineers Ltd 130,516 130,516
11 A.S. M. Feroz Alam AnkhiTours and Travels 261,033 261,033
12 Md. Aman Ullah Arena lndustries Ltd. 244,744 204.7A4

Arena HRI Limited
Arena lnlotech Ltd.
SAMP Limited
Mousumi Enterprise Ltd.
Presidency University
Metropolilan University
l\,,letropolitan Education Promoters Ltd.
lnstitute ol Business & lnformation Technology
13 Md. Abdul Hannan JAS Garments Ltd. 261,033 261,033

Beu Fashion Ltd.
14 [,4d. Selim Cenkal Plaza.Dhaka 1 30,516 130,516

Metropolitan University
Metropolitan Educalion Promoters Ltd
Global lnsurance Ltd.
Sumon Cloth Store
65
SI Name o, the Directors Engaged entities Number of Share

No. holding position
2003 2002
15 Md. Nasiruddin Choudhury Techno-Foki (Bd.) Lld. 96.759 96,759
Holiday Travels Ltd.
Technocon Ltd.
l\ranar Associates Ltd.
Living Plus Ltd.
Delta Medical Centre Ltd
16 Morshed Alam Bengal Plaslic lndustries Ltd. 163,145 163,145

Bengal Adhesive & Chemical Products Ltd.
Bengal Overseas Corporation Ltd.
Bengal Poly and Paper Sack Ltd.
Power Utility Bangladesh Ltd.
Compact Flourescent Lamps Company Ltd.
Bengal Marbles Ltd.
Bengal Build-up Bangladesh Ltd.
Bengal Poly Pack Ltd.
Bengal Agro Estate Ltd.
Jack in the Box Ltd.
Bengal Hyper Market Ltd.
17 Md Shahabuddin Alam Samannaz Super Oil Ltd. 130,51 6 130,516

S. A. Oil Refinery Ltd.
S.A. Condensed N,1ilk Ltd.
Laila Vanaspali Products Ltd-
Samannaz Condensed lvlilk Lld.
Samannaz Dairy & Food Products Ltd
Laila Pet Bottles & Food Products Ltd
South Easlern Tank Terminal Ltd.
1B S.M. Abdul Mannan Techno-Foki (Bd.) Ltd. 74,704 74,704

Living Plus Ltd.
Technocon Ltd.
l\4anar Associates Ltd.
Delta Millars Ltd.
Della Medical Cenlre Ltd
Piu-Oe Fashionova Ltd.
19 Al-hai Mosharref Hossaan I\r.H. Traders 195.775 195,775

Desh General Insurance Co. Ltd
Toka lnk (BD) Ltd.
2q)3 2002
3'l CLOSING CASH & CASH EOUIVALENT Taka Taka
Cash in hand (lncludang foreign currencies) 128,984,705 104,907 ,297
Balance with Bangladesh Bank & Sonali Bank 676,839,826 442,122,334
(lncludlng toreign currencies)
Balance with other Banks & Fanancial institutions 2,693,120,982 3.767,381,574
Money at Call & Short Notice 1,240,000,000 1,260,000,000
lnvestments-Government (Note-6) 2,070,369,900 1.380,289,000
6,809,315,413 6,954,700,20s
32 EVENTS AFTER BALANCE SHEET OATE

Proposed Dividend
The Board ol Direclors of the Bank has proposed and recommended Bonus Shares @ 25"k at paid-up capital (Tk
639,530,000) ,subject lo lhe approval ol Securities and Exchange Commission and Bangladesh Bank.
J+rft"e q$src
Director Oirector
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Director Managing Director
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llll nn"r""ntile Bank Limited

Regislered Office:61 Dilkusha C/A, Dhaka, Bangladesh
Proxy Form
t,
of or
being a member of l\rercantile Bank Limited do hereby appoint
of
faihng him / her
of
as my Proxy/Attorney in my absence to attend and vote lor me and on my behalf, at the sth Annual General Lleeting
of the Company to be held on lhe June 14,2OO4 al ll:00 A[il and at any adjournment thereol.
As witness my hand this day of 2004
(Signature of the Shareholde0 (Signature of Proxy)

Revenue
Folio No. Stamp of
Tk 8r
Note : The Proxy Form duly completed must be deposited at the Begistered Office of the Company not less than 72
hours before the time fixed for the meeting. The proxy need not be a member ot the Company.
Ilfl nn"r"rntite Bank Limited

Oflice:61 Dilkusha
Registered C/A, Dhaka, Bangladesh
Attendance Slip
I hereby record my attendance at the sth Annual General Meeting of the Company being held on June 14, 2004 at
11:00 AlVl at Winter Garden, Dhaka Sheraton Hotel, Dhaka.
Name ol the Member/ Proxy.........
Folio No. Signature
Note : Please complete the attendance slip and hand it over at the entrance.

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Annuol Report

MBL Time Line 1

Message from the Founder Chairman

Directors and Sponsors 4-5

The Corporate Structure 6

Head Office & Branch Network 8

Highlights of l\.4ercanlile Bank Limited 9

Otf - Balance Sheet ltems 41

Profit & Loss Account 42

Cash Flow Statement 43

Statement of Changes in Equity 44

Assels and Liability Maturity Analysis 45

Notes to the Financial Statements 46-65

Statement of Fixed Assets 66

Dec 24, 2003

Subscriptlon ior Shares

Op€ning of 15lh Branch

0E i Tier ll 1.070/o 0.90%

Message from the Founder Chairman

Net lnterest Margin 3.36%

We are also committed to a perlormance culture where recognition and

The protessionalism, dedication and loyalty already demonstrated by our

Md. Abdul Jalil

Directors and Sponsors

Md. Abdul Jalil

Md. Anwarul Haque

Dr. Toulique Rahman

Md. Aman Ullah

Md. Abdul Hannan

Directors and Sponsors

Md. Tabibul Huq

Subrota Narayan Roy

Md. l,rizanur Rahman

S.M. Abdul lvlannan

Morzina Khan Monzu

Md. Shahabuddin Alam

A. K. [,4. Shaheed Beza

The Corporate Structu re

The organizational structure and corporate Directors & Sponsors

strongly reflect its determination to Md. Anwarul Haque

matters beyond delegated powers of Bilkis Begum

with the Board of Directors, l\y'anagement

Md. Abdul Jalil Company Secretary (Acting)

Jamshed B. Khan Auditors

Md. Anwarul Haque

Senior Asstt. Vice Presidents

Vice Presidents Kawser Uddin Ahmed

'll lApr 13,2004 [i]d. Shafiqul lslam

Head Office & Branch Network

HEAD OFFICE Board Bazar Branch

Sylhet Branch Madam Bibir Hat Branch

Highlights of Mercantile Bank Limited

(Amount in Million Taka)

Particulars 2003 2002

Paid-up Capital 639.53 319.765

Total Capital 1,235.23 684.56

Capital surplus/(def icit) 174.30